Virgin Galactic Stock Jumps as the FAA Concludes Investigation

Text size

Stock in space tourism pioneer

Virgin Galactic

is soaring in after hours trading Wednesday because of good news from the Federal Aviation Administration, which is responsible for the safety of commercial aerospace operations—even operations that reach space.

The FAA announced Wednesday evening that it has completed its investigation into some flight path anomalies on the launch that took Galactic (ticker: SPCE) founder Richard Branson to space.

That historic flight took place in mid-July. It was the country’s, and the commercial aerospace industry’s, first space tourism flight.

Virgin Galactic stock is up more than 10% in after hours trading to almost $25 a share. Shares dropped 3.6% in Wednesday trading. The

S&P 500
and

Dow Jones Industrial Average
were up 0.2% and 0.3%, respectively.

The Branson flight, which generated a lot of public buzz, ended up deviating from its assigned airspace on its descent from space. The FAA found that Galactic failed to communicate the deviation to the FAA as required. Looking ahead, the FAA is requiring the company to implement changes on how it communicates to the safety regulator.

It appears to be a reasonable resolution. The good news for investors is Virgin Galactic can return to flight operations. That means the company can continue testing and, in coming months, start commercial operations.

“The FAA is responsible for protecting the public during commercial space transportation launch and reentry operations,” reads part of an emailed statement explaining the FAA process. “A mishap investigation is designed to determine the root cause of the event and identify changes the operator must implement to avoid a recurrence of the event.”

Virgin Galactic stock dropped roughly 10% in the aftermath of the FAA grounding, which occurred at the start of September. Shares traded below $25. They haven’t really recovered, but many growth stocks have traded down in recent days as interest rates have risen.

Higher rates hurt growth stocks, like Galactic, because they decrease the present value of future cash flow. Galactic isn’t generating substantial sales yet. Most of its cash flow will come far in the future.

Write to Al Root at [email protected]