What happened
Sir Richard Branson Foundation actions Virgin Galactic Holdings (NYSE: SPCE), and controlled by Sir Richard Branson VG Acquisition Corp. (NYSE: VGAC.U) Both are slipping today, a day after the last – Branson’s latest special-purpose acquisition company – has announced that it will acquire the popular genetic testing company 23 & Me.
As of 10:45 EST, Virgin Galactic shares fell 2.3% and the acquisition of VG fell 6%.
Image source: Getty Images.
And
The news that Branson’s SPAC is going to acquire 23 & Me – and not, as previously thought, the private rocket launch company Virgin Orbit, founded by Branson – was met with acclaim by (some) investors yesterday. Investors increased the offering of VG Acquisition shares by 31% at the end of the day. The reason we are seeing VG Acquisition’s shares drop a little today is probably a function of investors profiting from some of those unexpected profits.
However, while VG Acquisition’s shares soared yesterday, Virgin Galactic’s shares fell 4.2%. Why was it This one?
My guess is that it’s because Branson decided to invest his SPAC money in a genetic testing company, rather than a space company. If investors infer from this decision that Branson is not all-in in space, then they may be thinking that they I shouldn’t be so excited about investing in space.
What now
And, of course, there is another factor at play: evaluation.
In its press release announcing the acquisition, VG Acquisition predicted that 23 & Me will go public (under the symbol “ME”) with a valuation of $ 3.5 billion. That seems like a pretty high price to pay for a company with unknown revenue and profits. In addition, a handful of law firms have filed lawsuits pointing out that VG Acquisition shareholders will hold only about 11% of the combined company ($ 385 million), despite contributing more than $ 500 million in cash to the transaction. .
This makes the deal even less attractive to VG Acquisition shareholders – and it could be the even bigger reason they are selling today.