Lawsuit alleges lack of due diligence in Amazon's Project Kuiper launch contracts with Blue Origin, ULA

An institutional investor is suing Amazon and its board of directors, including founder and executive chairman Jeff Bezos, over hefty launch contracts they awarded to Bezos' space company Blue Origin.

The lawsuit, filed by Amazon shareholders the Cleveland Bakers and Teamsters Pension Fund, alleges the board spent less than 40 minutes approving deals to launch the Project Kuiper mega-constellation of 'Amazon, without even considering the main launch company (and Blue Origin). rival) SpaceX.

“Amazon directors likely spent barely an hour before blindly approving Amazon’s money flowing to Bezos’ unproven and struggling rocket company,” the complaint states. The plaintiffs claim the board failed to shield the negotiation process “from Bezos’ glaring conflict of interest.”

Amazon announced its satellite broadband initiative, Project Kuiper, in early 2019; the same year, the company applied for a regulatory license to deploy a constellation of more than 3,200 satellites in low Earth orbit, at an expected cost of several billion dollars.

As the lawsuit notes, Amazon had a "Herculean task" ahead of it: Regulators only gave the company 9 years to get its entire constellation into orbit, so time is running out to negotiate several dozens of rocket launches, possibly spread across multiple vendors.

When regulators approved Amazon's license to launch and operate its constellation in July 2020, Amazon management informed Amazon's audit committee that the company was in talks with Blue Origin and three others launch vendors for Project Kuiper launch contracts, the lawsuit says. These other launch providers were Arianespace, United Launch Alliance and a third limited company.

But it seems that SpaceX was never considered as a possibility. Plaintiffs in the lawsuit expressed bewilderment that SpaceX, the leading rocket company, was never in the running: "Inexplicably, the world's most famous, reliable and obvious launch provider – SpaceX – was not among the four companies presented to [Amazon's] audit committee. »

Instead, Amazon chose European company Arianespace, along with Blue Origin and United Launch Alliance, whose Vulcan Centaur rocket is powered by BE-4 engines made by Blue Origin.

Although the exact value of the contracts has been suppressed from the public version of the lawsuit, plaintiffs claim that the launch contracts of all suppliers represent "the second largest capital expenditure in Amazon's 25-year history ". First in importance is the company's acquisition of Whole Foods for $13.7 billion. According to the lawsuit, nearly 45% of the total contract value went to Blue Origin.

So far, Amazon has spent about $1.7 billion on launch deals, of which $585 million has gone to Blue Origin.

The legal filing also highlights the ongoing rivalry between Blue Origin and SpaceX – which has seen the two companies bid for the same contracts, with results unfavorable to Blue – as well as the antagonisms between Musk and Bezos personally.

The suit was filed in the Delaware Court of Chancery earlier this week. The Delaware Business Court Insider was the first to report on it.