Masten declares bankruptcy after fighting for NASA’s lunar contract

Moon-focused company Masten Space Systems filed for Chapter 11 bankruptcy protection, with the firm being screened for a handful of people after layoffs and leave.

The space company said its debts have increased, tracing back to a NASA contract awarded to Masten two years ago. Once seen as a big win for the small business, the NASA deal left Masten over budget, as well as being unable to raise funds or pay employees.

Masten predates many of the companies that emerged during the private investment boom in the space sector of the past decade. The company has long had an industry reputation as a gritty shop for young engineers who cut their teeth on rocket and spacecraft technologies at facilities in the Mojave Desert near NASA’s Armstrong Center and the base of the Edwards Air Force.

While Masten has a history of impressive hardware demonstrations, the company’s failure showcases the delicate balancing act required 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 more difficult.

Founded in 2004, Masten has regularly won small contracts and awards to test and develop reusable spacecraft capable of taking off and landing, particularly for the surface of the moon. The company had an unofficial motto: “Shut up and fly”.

Masten had won numerous contracts with NASA, but the most notable was the $ 75 million award in 2020 for delivering eight scientific payloads on a mission to the Moon’s South Pole. At the time of the award, Masten had around 15 staff members.

The contract with NASA would have been Masten Mission 1, or MM1. It would fly 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 started growing rapidly to build the lander.

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

To avoid overspending the budget, Masten needed to increase his contract with NASA with additional payloads on missions to get even aggressive cost estimates. But MM1’s total budget still ended up exceeding cost expectations. As development continued, Masten predicted the mission would be between $ 10 million and $ 30 million over budget, those people said.

In early 2021, Masten’s board of directors and senior management began an effort to raise up to $ 60 million in outside capital. The company had previously raised little more than small sums from angelic investors. But the effort never found a major investor and Masten remained on the razor’s edge. 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 has added a new level of pressure.

Masten rose to around 120 employees and contractors on staff last year, but lack of funds and rising debt stifled further progress. The board of directors effectively removed CEO Sean Mahoney in January. People familiar with the situation said a $ 1.4 million NASA Covid-related payment in February simply kept the company solvent a little longer. NASA has distributed funds as part of the broader federal disaster relief program to US businesses.

The company then fired 20 people in June, those people said, with 15 notably from the MM1 team. In July, Masten fired nearly all of the company’s remaining employees, as reported by the Mojave-based Parabolic Arc blog and confirmed by CNBC.

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

“In the event that Masten Space Systems is unable to complete its order of activities, NASA will manifest its payloads on other CLPS flights,” the agency said.

To date, NASA has paid $ 66.1 million in the contract for the Masten mission.

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

SpaceX has the largest unsecured credit on Masten’s debt, with $ 4.6 million unpaid as a supplier. A number of suppliers and other space companies are listed as large creditors, such as Airbus and Astrobotic, with debts each of $ 500,000 or more.

The Masten Depot specified that, among its properties, immediate attention is needed for explosive and dangerous chemicals. Intuitive Machines, another moon-focused company, gets first dibs on Masten’s launch deal with SpaceX, following a “stalking asset purchase agreement.”

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

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