Why Is Virgin Galactic's Share Price Crashing?

Back on July 11, Virgin Galactic (NYSE: SPCE) successfully sent Richard Branson to the edge of space on its first manned mission.

Since then though, its share price has plummeted 35%, and now, all of its flights have been grounded by the Federal Aviation Authority (FAA) pending an investigation.

It was all going so well...

There was a point there yesterday where things were really looking up for Virgin Galactic. 

It had just confirmed that its next flight, Unity 23, would be its first commercial research mission, sending scientists and members of the Italian Air Force to the edge of space. Its share price was up 10% by mid-day, and analysts were considering how this move would impact future business in a positive way.

And then, the warning lights flashed.

I'm talking about literal warning lights which a report from Wednesday claimed were flashing on the July 11 mission, believed to be related to the flight veering off course. This story led to Virgin being smacked with an FAA grounding order yesterday. In a statement from the federal body:

"Virgin Galactic may not return the SpaceShipTwo vehicle to flight until the FAA approves the final mishap investigation report or determines the issues related to the mishap do not affect public safety."

The "mishap" in question refers to why Virgin Galactic flew outside of the area for which it was cleared on July 11. It is currently unclear whether there is a correlation between the reported warning lights and the flight's misaligned trajectory, but the investigation will likely clear up any confusion.

It's hard to predict what will become of the inquiry, but investors will be hoping that things get smoothed out before the Unity 23 launch, which was planned for the end of September/early October. 

A successful research mission could result in more lucrative research contracts in the future, helping diversify its currently tourism-focused revenue stream. 

Best keep an eye on this one folks.

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