Tesla...Meet Virgin Galactic

Since the beginning of the year and since Tesla announced their earnings in January, the stock has been in "Ludicrous mode." Ludicrous mode is a technology in certain Tesla cars that gives a 10% boost to the vehicle's acceleration. We have witnessed two straight days in which Tesla increased $100. And now Tesla has become the first American automaker to hit $100 billion valuation.

Telsa has a lot of great things going for itself, but it's the short sellers that are behind the rapid price increase in 2020. According to the firm, S3, 21% of total shares outstanding are short. However, Tesla shorts loss $2.89 billion 2019 and far this year they are down about $8 billion.

Virgin Galactic debuted on the New York Stock Exchange and became the first publicly traded space tourism company. Virgin Galactic Holdings, Inc., an aerospace company, develops human spaceflight for private individuals and researchers.

Ever since the company announced a key milestone that their second ship is now “Weight on Wheels,” meaning the main parts of the vehicle are assembled and on the landing gear, the stock has been on a tear. If I blacked out the price axis, anyone and everyone would think this chart was Tesla.

The company announced a goal the beginning of 2020, to send its founder, Sir Richard Branson, into space this year, for this 70th birthday. The company also has plans to scale operations with an estimated 16 flights to take place this year, 115 next year and 270 by 2023. But currently Virgin Galactic has a waitlist with more than 600 people from 60 countries signed up to take a trip into space. Each ticket costs about $250,000, adding up to $80 million in collected deposits and $120 million in potential revenue.

Shares of Virgin Galactic Holdings Inc. shot up 11% in active premarket trading Tuesday, after a shareholder disclosed a relatively large stake in the spaceships builder. The stock, which has run up 55% over the past six sessions, has closed at a record the past five sessions. Park West Asset Management LLC disclosed late Friday that it was the beneficial owner of 4.25 million shares of Virgin Galactic, or 2.1% of the shares outstanding, which would make Park West the seventh largest shareholder, according to FactSet data.

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At this point, the valuation is out of hand...thanks to the short sellers having to buy back shares to minimize their losses.
Short-sellers have taken a $388 million bets against Virgin Galactic. This equivalent to roughly 31% of the company's float. The float is simply the amount of a company's shares that are publicly owned and available for trading, and tradable shares can be borrowed by short sellers. The rule of thumb is a short interest as percentage of float above 10% is pretty high and above 20% is extremely high. When you consider the short interests in the stock, along with unusual bullish options activity seen last month:

February calls,

March calls,

January 2021 calls,

it was a no brainer that the stock was going to move higher, but I wasn't expecting price to move into the $30s so quickly. What will be interesting is the company announces earnings on Feb. 25th. Depending on what they say, that's going to move price much higher or lower.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

Posted via Steemleo