Virgin Galactic (NYSE: SPCE) stock price is in a tailspin due to the collapse of its former subsidiary Virgin Orbit (NASDAQ: VORB). This came as a surprise to many as Virgin Orbit was set to play a major role in the British space program until a few months ago. On the news of the bankruptcy of Virgin Orbit, stocks of Virgin Galactic took a nose dive.
Virgin Galactic share price was already facing headwinds, and yesterday’s news has further intensified the downtrend. The stock tanked closed on Tuesday with an 11.6% drop, putting the overall weekly loss at 15%.
Virgin Orbit Got Listed In 2021 Via SPAC
During the 2021 bull run, the Special Purpose Acquisition Companies, also known as SPACs, boomed. As the name suggests, SPACs are formed with the sole purpose of acquiring companies and taking them public. One such SPAC merger also took Virgin Orbit public in December 2021, which was formed in 2017 as an offshoot of Virgin Galactic.
Even after the merger, Virgin Group still owns 75% of the bankrupt company. The event is likely to affect the brand value of Richard Branson’s led space tourism company. This was the primary reason why Virgin Galactic stock price tumbled on the news. This development has further deepened the concerns of many investors about SPACS, who were already skeptical.
Virgin Galactic Stock Price Has More Downside
The following NYSE: SPCE chart shows that the price action has been occurring inside a falling channel since February 2022. Despite several breakout attempts, Virgin Galactic shares have failed to break out of this pattern. This is because the bottom and top of the channel act as support and resistance, respectively.
Due to the rejection from the top of the channel earlier this year, Virgin Galactic stock forecast has become very bearish. This, together with the recent negative news, could be enough to take the price to the bottom of the wedge. This would be a 30% drop from the current price.
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