Space company Masten files for bankruptcy after struggling with NASA lunar deal – CNBC | Vette Leader

Lunar-focused company Masten Space Systems filed for Chapter 11 bankruptcy protection on Thursday, with the company reduced to a handful of employees after layoffs and furloughs.

The space company explained as its debt skyrocketed, dating back to a NASA contract awarded to masts two years ago. The NASA deal, once seen as a big win for the small company, left Masten running over budget and unable to raise funds or pay employees.

Masten predates many of the companies that sprung up during the last decade’s boom in private investment in the space sector. The company has long had a reputation in the industry as a murky workshop for young engineers learning about rocket and spacecraft technology at facilities in the Mojave Desert, near NASA’s Armstrong Center and Edwards Air Force Base could.

While Masten has demonstrated impressive hardware in the past, the company’s bankruptcy demonstrates the delicate balancing act required for long-term growth and success in the tough, capital-intensive space industry. Raising money for high-risk space projects is difficult, and even harder to achieve.

Founded in 2004, Masten regularly won small contracts and awards to test and develop reusable spacecraft that could take off and land, particularly for the lunar surface. The company had an unofficial motto: “Shut up and fly.”

Masten had received a number of NASA contracts – but most notable was the $75 million award in 2020 to deliver eight science payloads for a mission to the moon’s south pole. At the time of the award, Masten employed around 15 people.

NASA contract should be Masten Mission 1 or MM1. It would fly science payloads on the company’s Xelene lunar lander, scheduled for launch in 2023. Masten signed a deal with Elon Musk’s SpaceX to launch MM1. People familiar with the matter, who spoke anonymously due to the sensitive nature of the matter, told CNBC that Masten quickly began building the lander.

But the award was immediately problematic for Masten, as she had written the proposal to NASA before the Covid pandemic hit. The company immediately had to adjust assumptions about what technologies would be developed internally rather than purchased, and vendors were unwilling to make commitments due to uncertainty about the new pandemic environment, according to people familiar with the matter.

To avoid going over budget, Masten had to expand NASA’s contract to include additional payloads for the missions to meet even aggressive cost estimates. But MM1’s overall budget ended up exceeding cost expectations. As development progressed, Masten expected the mission to be between $10 million and $30 million over budget, these people said.

In early 2021, Masten’s board and senior management began raising up to $60 million in debt capital. The company had previously raised little more than small sums from angel investors. But the effort never found a major investor, and Masten remained on the brink. The company has operated in survival mode for most of its existence, living from contract to contract and reinvesting all profits into the business. The new paradigm added a new level of pressure.

Masten grew to about 120 employees and contractors last year, but lack of funds and mounting debt stifled further progress. The board effectively fired CEO Sean Mahoney in January. People familiar with the situation said a $1.4 million Covid-related NASA payment in February merely kept the company solvent a little longer. NASA distributed funds to US companies as part of the broader federal disaster relief program.

The company then laid off 20 employees in June, these people said, including 15 from the MM1 team. In July, Masten furloughed almost all of the company’s remaining employees, the Mojave-based blog Parabolic Arc reported and was confirmed by CNBC.

A NASA spokesman wrote in a statement to CNBC that the agency “has received notification that its payloads scheduled for delivery aboard Masten Mission One may be affected by Masten’s business operations.”

“If Masten Space Systems is unable to fulfill its mission, NASA will manifest its payloads on other CLPS flights,” the agency said.

To date, NASA has paid $66.1 million of the contract for Masten’s mission.

The company has between 50 and 99 creditors, according to the filing filed Thursday, and estimates its assets to be worth between $10 and $50 million with debts ranging from $10 to $50 million.

SpaceX has the largest unsecured claim on Masten’s debt at $4.6 million as the seller. A number of suppliers and other space companies are listed as major creditors – such as Airbus and Astrobotic – with debts of $500,000 and more each.

Masten’s record indicated that immediate attention to explosive and hazardous chemicals was required next to his property. Intuitive Machines, another moon-focused company, is getting its first stake in Masten’s launch deal with SpaceX through a stalking horse asset purchase agreement.

A Masten representative did not respond to CNBC’s request for further comment on the bankruptcy.

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