Virgin Galactic – ticker SPCE has been rocketing up since the stock went public on October 28th, 2019 after merging with SPAC Stock IPOA Social Capital Hedosphia run by Silicon Valley mega-capitalist Chamath Palihapitiya.
The SPAC made Virgin Galactic the first and only publicly traded commercial human spaceflight company to date.
IPOA SPAC Launched Oct 28th, 2018 and traded in the $10 range as the Virgin Galactic was awaiting a deal. On July 8th, 2019, Social Capital Hedosphia and Richard Branson struck a deal valuing the company at approximately $1.5B.
Key SPAC Terms of the Transaction:
- Enterprise value at $1.5B
- Social Capital Hedosphia will own 49% of the new company; Richard Branson will retain 51% ownership of the new company
- Deal values invested capital into Virgin Galactic at 1.5x
- Deal values company at 2.5x expected 2023 Revenue
- Deal values company at 5.5x expected 2023 EBITDA ($270m)
- Chamath Palihapitiya will become Chairman after contributing $100m of capital to Virgin Galactic
- Richard Branson and other initial investors of Virgin Galactic are met with a $1.3B consideration, $1bn in stock with up to $300m in cash.
SPCE has over 600 customer’s from 60 different countries planned for late 2020/early 2021 space flights, at $250,000/ticket that’s over $100,000,000 in revenue.
Now the company has issued that they have over $120 million in prospective revenue, not including the launch of their “One Small Step” initiative in May to open the line to up to 400 more customers, putting total customers up to 1000, at a total backlog of revenue of $220 million. Virgin Galactic is currently not taking any more reservations but is taking Registrations of Interest.
Current cash equivalents at the end of 1Q2020 were $419m with a earnings loss of $60m.
Is SPAC Stock SPCE Still Worth Buying?
Virgin Galatic is building up towards starting flights at end of 2020 into the beginning of 2021, It will rapidly start building revenue. Company valuation at $19/share is just around $4bn dollar market capitalization, using the estimated 2023 EBITDA of $270m provided in the IPOA/SPCE merger, SPCE is trading at just under 15x EBITDA.
I would purchase most companies that have potential to open new sectors to the market, plus its the current front runner in the industry towards meeting all FAA regulation and getting NASA contracts. I believe any price below $20 is a great opportunity.
That said there is risk associated with the company as future revenues are dependent on meeting FAA regulations, and delays could occur given the recent pandemic going on. I believe that this risk is partially mitigated by the great performance that VG has had with their testing so far, as well as the enthusiasm the company has seen with sign-ups. I would pick up most companies with a 15x P/EBITDA not to mention one with such upside opportunity.
I see future EBITDA of this company getting to approximately $2.5B-$3B over the next decade. With a 15x-25x EBITDA multiple on $2.5B-$3B, I see the future company being worth approximately $37.5B to $75B between 2030 and 2035, or about $175-$350/share. A 900%-2000% return if you buy shares at $19.
What Is A SPAC Stock ? “Special Purpose Acquisition Company”
A SPAC stock is defined as a “special purpose acquisition company” sometimes called a blank-check company these are stocks with with no commercial operations that are formed to raise capital through an IPO for the purpose of acquiring an existing company. Continue Reading