SpaceX Competitor Accused In Government Memo Of 'Misrepresenting' Its Launch Readiness To Win Contracts

Rocket Lab USA Inc.'s RKLB stock has hit turbulence, with its shares down over 21% year to date.

Adding pressure to its share price is recent news that an internal congressional memo questioned Rocket Lab's stated progress to have its medium-lift, reusable Neutron rocket ready for launch by the end of the year to qualify for lucrative government contracts.

"In light of public reporting and media pressure, Rocket Lab has escalated their campaign to misrepresent their launch readiness in an effort to gain competitive advantage over incumbents and other new entrants," according to the memo. "Public records and information available to staff confirm that Neutron has no credible path to launch by 12/15/2024." 

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The government set a Dec. 15 deadline for companies to have their rockets ready to fly to qualify for government contracts that cover billions of dollars of future launches from 2025 to 2034.

One highlight of Rocket Lab's most recent earnings report was its $1 billion contract backlog, highlighting strong demand for its services.

The company's backlog more than doubled year over year, in large part because of a $515 million contract awarded by the Pentagon's Space Development Agency.

Rocket Lab Chief Financial Officer Adam Spice acknowledged that the end-of-year timeline for the Neutron rocket to be ready is optimistic, saying on the company's most recent earnings call that the timeline was for a "green-light schedule" where there are no problems with the rocket's development. 

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For an industry as challenging and unpredictable as rocket science, that's a tall order, especially as Rocket Lab has yet to start hot-fire tests of its Archimedes engine, the same engine used to power the Neutron rocket.

Rocket Lab CEO Peter Beck said that once tests begin on the engine, the company should have a better understanding of its Neutron schedule. 

"We'll know more about how close to the schedule and timeline we are once Archimedes breathes fire and we complete a couple of other major tests," Beck said.

Development of the Neutron is critical for the company's goals to "own the keys of space" and compete with SpaceX, he said.

"Without Neutron … it makes it difficult to be hugely disruptive in the services market."

Beck believes total addressable services in the space market are $320 billion.

Given that Rocket Lab's market cap is hovering at around $2 billion, it would be a massive win for shareholders if it can pull off its aggressive goals.

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