WASHINGTON — Virgin Galactic will ask shareholders to approve a reverse stock split intended to boost the falling share price of the suborbital spaceflight company.
The company released April 18 a proxy statement and notice of its annual meeting, scheduled for June 12. The statement includes the list of proposals the company will ask shareholders to vote on at the meeting.
One proposal will ask shareholders to approve a series of amendments to its certificate of incorporation to perform a reverse stock split of between 1-for-2 and 1-for-20. That would convert anywhere from 2 to 20 existing shares of Virgin Galactic stock into one new share, with the exact ratio and timing of the reverse split to be determined by the company’s board.
The reverse split would have the effect of increasing the share price. Such splits are often done to comply with listing requirements on stock exchanges, which typically require shares to trade at prices of at least $1. Virgin Galactic shares closed April 18 at $0.97 and earlier in the day traded at $0.90, a 52-week low.
In the proxy statement, the company said the board backed the amendments for the reverse stock split “with the primary purpose of improving the perception of our common stock as an investment security, resetting our stock price to more normalized trading levels in the face of potentially extended market dislocation and decreasing price volatility for our common stock, as small price movements currently may cause relatively large percentage changes in our stock price.”
The filing also acknowledges that the reverse stock split would also address any concerns the stock could be delisted on the New York Stock Exchange, which requires a minimum share price of $1 over a 30-day period. “The Board intends to effect the Reverse Stock Split only if it believes that a decrease in the number of shares outstanding is in the best interests of the Company and our stockholders and is likely to improve the trading price of our common stock and improve the likelihood that we will be able to maintain our listing on the NYSE.”
The company’s share price has declined gradually since last June, when the company reached a 52-week high of about $6 a share shortly before the first commercial flight of its VSS Unity suborbital spaceplane. In November, Virgin Galactic announced it would retire Unity by mid-2024 to devote its resources to the production of its next-generation Delta-class vehicle, which the company expects to enter commercial service in 2026.
Virgin Galactic went public in 2019 through a special-purpose acquisition company (SPAC) merger and share prices peaked at more than $50 per share at times in 2021. Other space companies that subsequently went public through SPAC mergers, including Astra, Momentus and Spire, have also performed reverse stock splits to maintain their listings.