Lawsuit alleges no due diligence in Amazon’s Project Kuiper launch contracts to Blue Origin, ULA

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

The suit, filed by Amazon shareholders the Cleveland Bakers and Teamsters Pension Fund, alleges that the board spent less than 40 minutes approving the launch agreements for Amazon’s Project Kuiper mega-constellation, while not even considering leading launch company (and Blue Origin rival) SpaceX.

“Amazon’s directors likely devoted barely an hour before blindly signing off on funneling […] Amazon’s money to Bezos’ unproven, struggling rocket company,” the suit says. The plaintiffs say the board failed to protect the negotiation process “from Bezos’ glaring conflict of interest.”

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

As the suit notes, Amazon had a “Herculean task” ahead of it: regulators granted the company just 9 years to get its entire constellation into orbit, so the clock was ticking on negotiating several dozen rocket launches, possible spread across multiple providers.

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 other launch providers for the Project Kuiper launch contracts, the suit says. Those other launch providers were Arianespace, United Launch Alliance, and a third unnamed company.

But it appears that SpaceX was never floated as a possibility. The plaintiffs in the suit expressed bafflement that leading rocket company SpaceX was never in the running: “Inexplicably, the most famous, reliable and obvious launch provider in the world – SpaceX – was not among the four companies presented to [Amazon’s] Audit Committee.”

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

While the exact value of the contracts is redacted from the public version of the lawsuit, the plaintiffs state that the launch contracts across all providers represent “the second-largest capital expenditure in Amazon’s 25+ year history.” The first-largest is the company’s acquisition of Whole Foods for $13.7 billion. According to the suit, almost 45% of the total contract value went to Blue Origin.

Thus far, Amazon has spent around $1.7 billion on the launch contracts, of which $585 million went to Blue Origin.

The legal filing also calls out the ongoing rivalry between Blue Origin and SpaceX – which has seen both companies bid for the same contracts, with results not in Blue’s favor – as well as the antagonisms between Musk and Bezos personally.

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