SPCE Eyes Fourth Consecutive Drop After Chairman Sells Stake

The security recently succumbed to pressure at its 10-day moving average

Deputy Editor
Mar 5, 2021 at 10:54 AM
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Space exploration name Virgin Galactic Holding Inc (NYSE:SPCE) is down 16.6% at $25.26 this morning, following news that chairman Chamath Palihapitiya sold his $213 million stake in the company, according to a Bloomberg report. In turn, the security is looking to notch its fourth consecutive loss, and is trading at its lowest level since January 2020.

It's been a wild ride for Virgin Galactic stock, which saw an incredible spike towards a Feb. 4, all-time high of $62.80, before staging a dramatic plummet that shows no signs of slowing down. The 10-day moving average, which guided shares to their record peak, has now stepped in as a level of resistance, though the equity still sports a 10.5% year-to-date lead.

Analysts have been somewhat hesitant, with three of the five in coverage dishing out a "hold" rating, compared to two "strong buy" ratings. The 12-mont consensus price target of $37.22, however, stands at a 44.2% premium to last night's close, which could leave the door open for price-target cuts, should SPCE continue to tumble.

Short sellers, meanwhile, have been hitting the exits in droves. Short interest dropped 49.2% in the last reporting period. However, it looks like these bears are still in control, as the 19.61 million shares sold short account for a solid 15.9% of the stock's available float. It should also be noted that SPCE is currently on the short-sale restricted (SSR) list. 

Drilling down to today's options activity, 36,000 puts have crossed the tape so far, which is twice the intraday average. Most popular is the weekly 3/5 27-strike put, followed by the 3/12 25-strike put, with new positions currently being opened at both. Buyers of the former are expecting more downside for SPCE by the end of the day, when contracts expire.

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