what happened
Shares of Sir Richard Branson formed Virgin Galactic Holdings (NYSE: SPCE), and Sir Richard Branson-controlled VG Acquisition Corp. (NYSE: VGAC.U) both are slipping today, one day after the latter – Branson’s latest acquisition company – announced that it would acquire the popular gene testing company 23 & Me.
As of 10:45 EST, Virgin Galactic’s share is 2.3% lower and VG Acquisition’s 6%.
Image Source: Getty Images.
Approximately
The news that Branson’s SPAC 23 & Me will be acquired – and not, as suspected, the private rocket launch company Virgin Orbit, which was founded by Branson, was praised by (some) investors. Investors are offering 31% of the VG share at the end of the day. The reason why we are slightly reducing the share of VG Acquisition today is probably a function that investors are earning some of the windfall profits.
While the share in VG Acquisition rose yesterday, Virgin Galactic shares fell 4.2%. Why was that?
My idea is that Branson decided to throw his SPAC money at a genetic testing company rather than at a space company. If investors conclude from this decision that Branson is not everything in space, they may be thinking about it. they should also not get so excited about space investing.
Now what
And of course there plays the other factor: valuation.
In its press release announcing the acquisition, VG Acquisition predicted that 23 & Me would be disclosed at a valuation of $ 3.5 billion (under the symbol “ME”). Rather, it seems like a high price to pay for a business with unknown revenue and unknown profits. In addition, a handful of law firms have already filed lawsuits alleging that VG Acquisition shareholders will own only about 11% of the joint venture ($ 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 could be the even bigger reason why they are selling today.