What's up guys and welcome back to wall street millennial on this channel, we cover everything related to soccer. Investing over the past decade, there's been a revolution in the space industry with private companies, including spacex and blue origin, rapidly developing space flight technology. There's something about outer space which captivates the imagination - and there is an innate human desire to explore, was just beyond our current reach. In 2004, the british billionaire sir richard branson founded virgin galactic.

The goal of the company was to turn humanity's dream of space travel into a reality. They developed a spaceship which can take paying tourists above the atmosphere. This will allow them to view the earth from space and achieve zero gravity. In 2019, they went public with the help of chamath paula, hapatia's, first spec, to great fanfare.

For the first time ever, ordinary investors were able to buy a piece of the new space economy in their first year as a public company. They were one of the best performing stocks in the entire market at their peak this past june, the stock was more than a six-pack from the original stack price of ten dollars. Keep in mind that this peak in share price happened before they took a single paying customer into space. It looked like everything was going well for the company, their stock price was at record highs and they were within months of having their first commercial space flights.

But for a variety of technical issues, their flights were delayed time and time again in the most recent delay. They say they won't have paying customers in space until the fourth quarter of 2022. That's a full two years after their initial target of 2020, and many analysts even expect that this delayed timeline is optimistic, as they say the faster. You rise, the harder you fall while virgin galactic was one of the best performing specs.

While the bubble was inflating. It also had one of the most violent falls from greys. The current share price of nine dollars is more than eighty percent off its highs and is even below the initial stack price of ten dollars in this video. We'll look at why virgin galactic attracted so much hype and how all came crumbling down virgin galactic was founded all the way back in 2004 by billionaire business magnate, sir richard branson, conventional spaceships, lift off from the ground and vertically ascend to space.

This is extremely energy. Intensive and way too expensive to support mainstream space tourism, so virgin galactic thought of a better way. They made a giant two-headed airplane called the mother ship. The mothership takes off from a runway similar to a traditional airplane.

It carries a spaceship on its belly and drops it off once it reaches a high enough altitude. From this point, the spaceship uses its rocket to leave the earth's atmosphere. This method is far cheaper and more energy efficient because they skip the vertical launch. While it's a brilliant idea, it's an extremely difficult engineering challenge.

The spaceship travels at more than three times the speed of sound and reaches an altitude of 56 miles above ground. It also has it, come all the way back down to earth and slowed down enough to land safely. The first spaceship they developed was called the vss enterprise and it started its first test flights in 2010.. Things were looking good and they initially hoped to have commercial flights within the next few years, but with commercial space tourism being a pioneering industry, a lot more safety tests would have to be done for ordinary people to feel comfortable.

It's probably a good thing that they didn't do any commercial flights. In the early days. In 2014, their vss enterprise rocket ship suffered a catastrophic failure 11 seconds after dismounting from the mothership it violently broke apart and crashed to the ground of the two pilots. One was able to escape with a parachute to the ground.

The second was unable to get out and tragically died. The national transportation safety board conducted an investigation and found the proximate cause of the crash to be that one of the landing systems was deployed too early. It was human error, not a fundamental flaw with the spacecraft itself, while this came as little consolation to the deceased co-pilot's family, it was good news for virgin galactic. While it was an indictment of the lack of pilot training and safety features, the technology itself was functioning properly.

Richard branson wasn't about to let one single spaceship crash derail his ambitions. He continued pouring money into the company and by 2016 they unveiled the vss unity which had improved safety features and performance specifications in december of 2018, the unity spaceship traveled to an altitude of 83 kilometers which surpassed the technical definition of outer space at this level, passengers In the ship experience full zero gravity similar to the international space station. By this point, they had proven that their technology works and they hadn't had any major safety issues. Since the enterprise disaster four years prior virgin galactic was no longer a speculative startup.

They were a real company and probably within just a couple years of making real revenue in 2019. Branson met with another venture capital, billionaire chamath, pola habita. At the time, chamoth was looking for an acquisition target for his first spa. Chamath spak agreed to merge with the company at a roughly 2 billion valuation and take it public on the new york stock exchange under the ticker symbol spce.

At the time the company had zero revenue. It was burning more than 100 million dollars per year, but there was a reason for optimism. The business model is simple: they'll sell tickets for two hundred fifty thousand dollars a piece which will allow passengers to go on a two hour, space trip and briefly experience. Zero gravity, while 250 000 is a lot for an ordinary person.

There are 1.4 million households with a net worth of over 10 million dollars in the us alone. If you include the entire world, there could be close to 10 million such households. The super luxury aspect of space tourism benefits from the growing trend of income, inequality with virgin galactic being the only game in town. They should have no trouble getting hundreds of thousands of millionaire customers so long as they can prove their flight is safe at the time they went public.

They had over 600 reservations, which represents the potential for over 120 million dollars in eventual revenue. Before the spat closed. In 2019, chamath said that he expected the company to start commercial flights in 2020 and be profitable by 2021.. I'm going to try and nail down a little bit more detail on when this is all going to happen is.

Are there any clauses in the deal that you struck with richard about when that first flight has to happen? No um the model that we are operating from the operating model around which we're building the business shows that we're going to be in commercial operations within a year in the first half of next year is when we'll start to see the really ramping of of customer Flights of revenue generating flights, we expect profitability in mid uh. 2021.. Now 2021 has passed, so we can see how these projections played out today, virgin galactic has still not flown a single paying customer into space instead of being profitable. They still have zero revenue for practical purposes and are losing tens of millions of dollars every single quarter.

They now say they expect their first commercial space flight in the fourth quarter of 2022, more than two years after they originally planned. The worsening outlook for the company has sent its share price down more than 85 percent from the all-time highs and is currently well below its initial stack price from 2019.. So what exactly went horribly wrong in 2020 pandemic-related restrictions in their home state of new mexico prevented them from performing necessary test flights, and they delayed their projection of first customer flights until 2021. The pandemic wasn't their fault and there's not really anything they could do about it, so you can't blame them for their 2020 delays.

In fact, the stock actually rallied almost 400 from its pandemic lows to its peak in february 2021., since the delays were purely the result of kovid. Once the pandemic is resolved, they should be able to get back on track. The stock was also helped by general exuberance around speculative technology stocks. At the time in the summer of 2021 founder richard branson flew on their first ever fully crewed space flight.

This was meant to show the technology was safe for passenger travel and commercial flights should begin soon. Unfortunately, this optimism was short-lived in december of 2020, they performed a test flight with a new flight control computer system, one of the rocket motors unexpectedly halted because it lost connection to the computer. The company said that this was the result of electromagnetic interference. They said it was a pretty straightforward problem to solve and that they should have it fixed by may of 2021.

to make matters even worse. Chamath paul habedia dumped his entire 213 million dollar personal stake in the company. Around the same time, he said that he still believed in the company and only sold his state to free up money for future investments, regardless many investors were taken aback by his 180 degree u-turn on the stock, given how bullish he seemed to be back in 2019. In may of 2021, things got even worse.

They said that they had to delay flights again as a result of unexpected wear and tear issues on their mothership. They said they were evaluating when they could perform another space flight, but declined to give a concrete date. In october, they again delayed commercial space flight until the fourth quarter of 2022, as they have to undergo a 10-month enhancement process to improve the space ships. Investors were willing to give them a pass in 2020 because of kovid, but since 2021 the never-ending delays have been the result of their own technical issues.

They have nobody to blame for that, but themselves. Investors have finally lost patience with the company as revenue, let alone profitability appear to be a long way off, depending on how many more delays they have it's possible that they'll have to issue more shares at the current depressed prices to fund their cash burn. Such a move would be massively diluted to current shareholders virgin galactic is an innovative company pursuing an exciting mission. There's no doubt about that, but their mission is not easy.

Their rocket ship goes 50 miles above ground and travels at 3 times. The speed of sound perfecting the technology. To avoid crashes like the one in 2014 is no small order. Over the past year, it seems like they have had technical issue after a technical issue, and while they have given a target for the fourth quarter of this year, they've missed their targets so many times in the past that they've become basically worthless.

At the end of the day, this is an 18 year old space tourism company, which has yet to send a single taurus into space, and until that happens, it's just a giant cash burning machine. Alright, guys that wraps it up for this video. What do you think about virgin galactic? Do you think they'll perform a commercial launch in our lifetimes? Let us know in the comments section below as always. Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.