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Richard Branson limits future funding for Virgin Galactic

Sir Richard Branson has decided to not invest further in Virgin Galactic (SPCE) claiming economic hardship as a result of COVID and higher interest rates has changed his perspective on how much capital to allocate to his brand's space business. According to the Financial Times, Branson claims the company should have sufficient funds for the foreseeable future without his investment. Nonetheless, shares of the company dropped more than 15% following the report. Yahoo Finance anchors Brad Smith and Seana Smith break down the latest development with the company and what it could mean going forward.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editors note: This updated story more accurately represents Branson's comments about Virgin Galactic.

Video Transcript

SEANA SMITH: Well, Sir Richard Branson is bringing Virgin Galactic back to Earth saying that he's no longer going to add more money, invest more money into the space company, at least for now. In an interview with the Financial Times, Branson saying, quote, "we don't have the deepest pockets after COVID. And Virgin Galactic has got nearly $1 billion. It should, I believe, have sufficient funds to do its job on its own."

Now, last month, the space company did cut jobs. They also suspended commercial flights for about 18 months to help preserve some of that cash for development of a larger plane that's going to be used, hopefully, to carry passengers to the edge of space.

This is a bit concerning, though, for investors here, Brad. You never like it when you hear the owner of the founder saying that they are not going to be investing any more money into the company, at least, for now. And this is a company that requires a heck of a lot of capital. Want to just stay relevant and compete with some of the rivals, some of the other startups that are out there. But, obviously, to be successful in these launches down the road, they are going to need a heck of a lot of money. If you don't have Branson willing to pour more money in, you're asking what the future of this company looks like.

BRAD SMITH: Yeah. Some big questions, especially even on business updates that they just gave at the beginning of November talking about the galactic-0-- excuse me-- 06 spaceflight mission planned for January 2024 up in the air, as to whether or not that's going to happen.

Spaceship factory in Phoenix, Arizona, they were talking about opening that midway through next year. It requires a lot of capital to do that. Also, production schedule for the delta class spaceships, they said, at the time, it was on track for Revenue Service in 2026. That a longer-term target. But then at the end of the day here, even if Sir Richard Branson is saying that the company should have enough capital to operate as it needs to right now, I think, for some of the larger ambitions, and at the price tag that they're expecting to make these flights possible here of which they only completed six spaceflights over six months with positive customer feedback. They did add in this most recent earnings report.

At the end of the day, it's going to be a much higher frequency that these companies have to-- any company that's going to suborbital or even that orbital level of space travel and tourism, a tourism industry that still is going to be extremely expensive at the outset, you're going to have a limited amount of people that actually want to spend upwards of $200,000 to $250,000 for a ticket to this.

My goodness, why not just put a down payment on a house at the end of the day. And then, additionally, you think about ultimately how this company is going to maintain a profit over time. There's so many questions because of how much it actually costs to run these flights. This is a company that's still operating at a net loss here. Net loss of $105 million compared to $146 million net loss in the third quarter of 2022.

So sure, trimming some of the losses. But still, hundreds of millions of dollars in losses that this company could continue to see. And the absence of injection of capital from one of the billionaires of the world has become known and investing in some of the more innovative space or just broader travel industry as well.

SEANA SMITH: Yeah. There could be one less billionaire, I guess, in the space race when you talk about the fact that Bezos with Blue Origin, Elon Musk with SpaceX. They are pumping money into their firms, at least, for now. So giving them a bit of an edge, at least, when you compare it to Virgin Galactic today.