Masten files for bankruptcy after fight for NASA lunar contract
On Thursday, moon-focused Masten Space Systems filed for Chapter 11 bankruptcy as the company was reduced to a handful of people after layoffs and furloughs.
The space company said its debts were skyrocketing, dating back to a NASA contract awarded to Masten two years ago. Once considered a major victory for the small company, the NASA deal left Masten over budget, as well as unable to raise funds or pay employees.
Masten predates many companies that have sprung up over the past decade of private investment in the space sector. The company has long had a reputation in the industry as a serious shop for young engineers who cut their teeth on rocket and spacecraft technology at facilities in the Mojave Desert near the Armstrong Center in NASA and Edwards Air Force Base.
While Masten has a history of demonstrating impressive hardware, the company’s bankruptcy highlights the delicate balance needed for long-term growth and success in the tough, capital-intensive space industry. Raising funds for high-risk space projects is difficult, and making them even harder.
Founded in 2004, Masten has consistently won small contracts and awards to test and develop reusable spacecraft capable of taking off and landing, especially for the surface of the moon. The company had an unofficial motto: “Shut up and fly.”
Masten had won a number of NASA contracts – but the most notable was the $75 million prize in 2020 to deliver eight science payloads on a mission to the Moon’s south pole. At the time of the award, Masten had around 15 people on staff.
The NASA contract was going to be Masten Mission 1, or MM1. It would carry scientific payloads on the company’s Xelene lunar lander, scheduled for 2023. Masten has signed a contract with Elon Musk’s SpaceX to launch MM1. People familiar with the matter, speaking anonymously due to the sensitive nature of the matter, told CNBC that Masten had begun to expand rapidly to build the lander.
But the price was immediately problematic for Masten, as he had written the proposal to NASA before the Covid pandemic hit. The company needed to immediately adjust assumptions about which technologies would be developed in-house, as opposed to purchased technologies, and vendors were unwilling to make commitments due to the uncertainty surrounding the new pandemic environment, people familiar with folder.
To avoid going over budget, Masten had to augment NASA’s contract with additional payloads on missions to even aggressive cost estimates. But MM1’s total budget still exceeded cost expectations. As development continued, Masten expected the mission to be $10 million to $30 million over budget, these people said.
In early 2021, Masten’s board and senior management began an effort to raise up to $60 million in outside capital. Previously, the company had only raised small sums from angel investors. But the effort never found a lead investor, and Masten remained on a knife edge. The company operated in survival mode for most of its existence, living from contract to contract and reinvesting all profits back into the business. The new paradigm has added a new level of pressure.
Last year, Masten grew to around 120 employees and contractors, but lack of funds and growing debt have stifled further progress. The board effectively fired CEO Sean Mahoney in January. People familiar with the situation said a Covid-related $1.4 million payout from NASA in February only kept the company solvent for a bit longer. NASA has distributed funds as part of the broader federal disaster relief program to American businesses.
The company then laid off 20 people in June, those people said, including 15 from the MM1 team in particular. In July, Masten laid off nearly all of the company’s remaining employees, as reported by Mojave-based blog Parabolic Arc and confirmed by CNBC.
A NASA spokesperson wrote in a statement to CNBC that the agency “has received notification that its payloads to be delivered aboard Masten Mission One may be affected by Masten’s business operations.”
“In the event that Masten Space Systems is unable to complete its mission order, NASA will manifest its payloads on alternate 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 Thursday’s filing, and estimates its assets are worth between $10 million and $50 million, with debts between $10 million and $50 million.
SpaceX has the largest unsecured claim on Masten’s debt, with $4.6 million outstanding as a seller. A number of suppliers and other space companies are listed as major creditors — like Airbus and Astrobotic — with debts of $500,000 and more.
Masten’s file specifies that, among his assets, immediate attention is needed for explosive and hazardous chemicals. Intuitive Machines, another moon-focused company, gets the first information about Masten’s launch contract with SpaceX, following a “hunting horse asset purchase agreement”.
A representative for Masten did not respond to CNBC’s request for additional comment on the bankruptcy.