Virgin Galactic posts loss, Sir Richard Branson expected to fly in beginning of 2021

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Chad Anderson, Space Capital Managing Partner, joins The First Trade with Alexis Christoforous and Brian Sozzi to discuss Virgin Galactic's second-quarter earnings report.

Video Transcript

ALEXIS CHRISTOFOROUS: All right, want to get to our Virgin Galactic, because it posted a loss in its second quarter after yesterday's closing bell. The company also announced plans to raise $460 million in a sale of common stock. Also, CEO Richard Branson could shoot into space on his Virgin Galactic aircraft as its first passenger early next year.

Let's discuss all of this now with Chad Anderson, Managing Partner at Space Capital. Chad, good to have you with us. You may be muted, so please unmute if you are, and tell us what you thought of that our earnings report from Virgin Galactic last night.

CHAD ANDERSON: Hopefully you can hear me coming through OK.

ALEXIS CHRISTOFOROUS: We do, thanks.

CHAD ANDERSON: OK, great. So Virgin Galactic is really more of a venture capital type investment. They posted no revenue and a $55 million loss. But that's really in line with what they've done over the last few quarters.

So I think really, the slide-in price and what we saw in after-hours trading was really more due to the fact that they're raising another half a billion dollars, and also that they've pushed their timeline for the first commercial [INAUDIBLE] 2021.

Although, you know, that's also a pretty typical aerospace space type timeline. Especially for a company that's focused on safety the way that they are and from our perspective, it's just really great to see that they had laid out next steps and a really concrete timeline for when they're going to get flying.

BRIAN SOZZI: Chad, the share sale-- it's a good chunk of money. I guess no surprise, just given the cash burn of that business. Should investors-- is that just the course, the name of the game here with Virgin Galactic, and investors should expect more cash raises over the next three to five years?

CHAD ANDERSON: Well, I'm not sure what their total cash needs are. But what is really interesting to me is that I think Virgin Galactic is really more indicative of investor enthusiasm for the broader space economy. And I think, you know, that this is really-- I don't think that they're going to have a problem raising this money, and I think it's more of a leading indicator of what's to come.

Really interestingly in space, we're moving from, you know, we've seen a lot of growth of the last five to 10 years. And we're going into a phase where we're moving from startup, really, to growth, really from a small community of space enthusiasts to leadership by seasoned execs.

And I think, you know, the moves that Virgin Galactic has made, particularly bringing in an ex-Disney executive, is emblematic of this larger shift that we're seeing. So I expect to see continued enthusiasm for this space.

ALEXIS CHRISTOFOROUS: Is there one company in particular that you see having an advantage at the moment, when you look at Elon Musk and SpaceX having the relationship it has with NASA? You've got Jeff Bezos with Blue Origins. Now you've got Branson with Virgin Galactic. Who is best positioned in your mind?

CHAD ANDERSON: Well, I mean, I think that a lot of the value of Virgin Galactic is based on this new hypersonic point-to-point travel that they're looking to build. But SpaceX is also building point-to-point with their new Starship that we're going to hopefully see hop in a test flight later today.

But from our perspective as investors in this sector, we're really interested to see how things are faring through the pandemic. And the market for space data actually has been growing quite significantly, as it always does in times of uncertainty, in these dynamic markets when people are looking for insights and information. Space data can provide that.

And so a lot of our portfolio companies that are taking advantage of data on the satellite side are actually seeing a lot more demand for their services.

BRIAN SOZZI: Chad, is there one company in your portfolio right now that we all need to keep our eye on?

CHAD ANDERSON: So all of our-- we're a venture capital firm, so everything that we're investing in is private. I would say that, you know, we are right in the middle of this monumental shift that I mentioned earlier. We're going from-- we've had a lot of investment in infrastructure over the last five to 10 years. And what's happening now is data distribution and marketplaces are coming in and harnessing that data and making it available to the tech community.

SkyWatch out of Waterloo, Canada is one of those companies that is a marketplace for satellite data and is going to grow that market 10x, in our opinion. So in the same way that every company today is a technology company, tomorrow every company is going to be a space company and is going to have satellite data integrated into their business model.