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Virgin Galactic looks like newest cult stock as short sellers dig in

Business

Wall Street's newest cult stock appears to be Richard Branson's Virgin Galactic Holdings Inc , as investors drive the space tourism stock to sky-high levels and short sellers dig in their heels.

FILE PHOTO: A Banner hangs outside the New York Stock Exchange (NYSE) ahead of the Virgin Galactic (SPCE) IPO in New York, U.S., October 28, 2019. REUTERS/Brendan McDermid

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20 Feb 2020 04:21AM
(Updated: 20 Feb 2020 04:25AM)

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SAN FRANCISCO: Wall Street's newest cult stock appears to be Richard Branson's Virgin Galactic Holdings Inc , as investors drive the space tourism stock to sky-high levels and short sellers dig in their heels.

Virgin Galactic jumped 15per cent on Wednesday, adding to a rally that has seen the money-losing company surge over 300per cent since early December.

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That hypersonic ascent has made it a favorite among short sellers betting the shares will eventually fall back to earth, drawing comparisons to Tesla Inc , which has also surged in recent months.

"Im calling it Tesla Junior because it's showing all the signs of becoming a cult stock on the long and on the short side," said Ihor Dusaniwsky, a managing director at S3 Partners, a financial analytics firm.

Like other so-called cult stocks, interest in Tesla and Virgin Galactic is driven by speculation about big future payoffs rather than fundamentals.

The value of short bets against Virgin Galactic hit a record US$500 million on Tuesday after the stock surged to its own all-time high, according to Dusaniwsky. The company's rally this year has cost short sellers US$345 million in paper losses.

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Virgin Galactic is racing against SpaceX and Amazon.com Inc CEO Jeff Bezos' Blue Origin to bring tourists into space, but is the only one of the three whose shares are publicly listed. That makes Virgin Galactic the only option for stock market investors who want to buy into the emerging business of space travel.

Traders on Wednesday were paying the equivalent of a 34per cent annual interest rate to borrow Virgin Galactic shares to Read More – Source