(Bloomberg) -- Virgin Galactic Holdings Inc.'s effort to take tourists into space suffered a setback over the weekend when a test flight was scrubbed shortly after takeoff because of a technical snag. The shares plummeted by the most since March 18 on Monday.
A computer on the company's SpaceShipTwo Unity that monitors the rocket motor lost connection, the company said in a Twitter thread following the flight Saturday. That triggered an intentional halt to the ignition of the rocket motor, leading to the end of the mission before it could reach space, the company said. The pilots flew the craft back to the Spaceport America launch site in New Mexico and landed safely.
The failure is likely to create another delay in the program that could last weeks, according to Myles Walton, a UBS Group AG analyst, though it may reassure potential travelers that the company's craft is safe. Virgin Galactic said last month that it planned to take founder Richard Branson into space late in the first quarter of 2021, and to resume ticket sales after that.
“The failure to reach orbit importantly validated safe failure modes for a rocket misfire, which likely won't make the market feel better Monday but is actually an important validation of safety of the architecture,” Walton wrote.
Virgin Galactic shares have soared 84% since the end of October, and speculators have been betting that the stock will fall. Short interest, a measure of bearish bets on the company, has risen to almost 31% of the shares available for trading, according to data from IHS Markit Ltd.
The stock dropped as much as 17% to $26.51 in early New York trading on Monday. The rally before the test flight “was extreme and so our expectation is for a rocky Monday for the stock,” said the UBS analyst, who recommends buying Virgin Galactic and sees the stock reaching $35 within a year.
Virgin Galactic will provide information “in the near future” on when it expects to be able to launch another test flight, the company said. It has a roster of 600 ticket holders who have paid as much as $250,000 each for a trip into space. It suspended sales after a 2014 crash killed a test pilot.
The flight Saturday was supposed to be the first of three tests planned through the first quarter. The second would include the two pilots and four employees in the cabin, while the third would include the pilots plus Branson among the passengers.
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