Large insider sales can be a red flag for investors. Insiders tend to have more information on their companies than anyone else so if they’re offloading stock, it often means that the outlook for the company is deteriorating.
In this report, we are going to flag some large insider sales at Virgin Galactic Holdings Inc (SPCE:US). Virgin Galactic is an American spaceflight company that is developing commercial spacecraft. Its aim is to provide suborbital spaceflights to tourists and suborbital launches for space science missions. The company is listed on the New York Stock Exchange and currently has a market capitalization of $7.7 billion.
Virgin Galactic: Insider Selling
Our data shows that on 3 March, Virgin Galactic’s Chairman Chamath Palihapitiya – who took the company public through a SPAC deal in 2019 – sold 6.2 million SPCE shares. The sale generated proceeds of approximately $213 million for the billionaire insider.
Palihapitiya Sold His Entire Personal Holding
This trade stands out because it has reduced Palihapitiya’s personal holding to zero shares. In the space of less than three months, the insider has gone from holding 10 million SPCE shares to no shares. Our Insider Model views this trading activity as bearish.
It’s worth noting, however, that after this sale, Palihapitiya does still own around 15.8 million shares indirectly through Social Capital Hedosophia Holdings – a SPAC that he formed with fellow investor Ian Osborne.
In a statement, Palihapitiya said that he plans to redirect the proceeds of the sale into a climate change-related investment. He added that he remains “as dedicated as ever to Virgin Galactic’s team, mission and prospects.”
Palihapitiya’s sales come after Virgin Galactic revealed further delays to its spacecraft testing program. When Palihapitiya’s SPAC merged with Sir Richard Branson’s company in 2019, the company said that it expected commercial spaceflights to begin by the summer of 2020. However, it recently advised that it now does not expect commercial flights to begin until early 2022.
The sales also come after the company posted a disappointing set of 2020 results in which its net loss rose to $273 million from $211 million in 2019. In the results, the group said that it expects costs to increase in the coming years.
In light of the recently-announced delays, we think caution is warranted towards Virgin Galactic stock after these large insider sales. They suggest that Palihapitiya sees minimal share price upside in the near term.