Amazon Shareholders Sue Over Alleged Lack Of Due Diligence In Project Kuiper Launch Contracts


Amazon Shareholders Claim Lack of Due Diligence in Project Kuiper Launch Contracts

An institutional investor is taking legal action against Amazon and its board, including founder Jeff Bezos, over the launch contracts awarded to Bezos’ space company, Blue Origin. The lawsuit, filed by Amazon shareholders the Cleveland Bakers and Teamsters Pension Fund, alleges that the board approved the contracts for Amazon’s Project Kuiper mega-constellation without proper due diligence, while disregarding potential competition from rival SpaceX.

Key Takeaway

The lawsuit filed by Amazon shareholders accuses the company’s board of failing to protect the negotiation process and properly consider alternative launch providers for Project Kuiper, including SpaceX.

Quick Approval Process Sparks Controversy

The plaintiffs claim that Amazon’s board spent less than 40 minutes approving the launch contracts, signaling a lack of scrutiny. The lawsuit argues that the board blindly funneled Amazon’s funds to Bezos’ struggling rocket company without considering other options. It alleges a glaring conflict of interest due to Bezos’ involvement with both Amazon and Blue Origin.

A Challenging Task for Amazon

Amazon unveiled Project Kuiper, its satellite broadband initiative, in early 2019. The company aimed to deploy a constellation of over 3,200 satellites into low Earth orbit with a projected cost of several billion dollars. With only 9 years granted by regulators to complete the ambitious project, negotiating launch contracts with multiple providers became a time-sensitive challenge.

No Consideration for SpaceX

The lawsuit highlights the omission of SpaceX, a leading rocket company, from the list of potential launch providers presented to Amazon’s Audit Committee. The plaintiffs express bewilderment at the exclusion of SpaceX, considering its reputation, reliability, and global recognition. Instead, Amazon chose Arianespace, a European firm, along with Blue Origin and United Launch Alliance.

The Cost of the Contracts

Although the exact value of the contracts remains undisclosed, the plaintiffs reveal that they represent the second-largest capital expenditure in Amazon’s history. These contracts have accounted for approximately $1.7 billion in spending, with nearly 45% going to Blue Origin.

The legal filing also reflects the rivalry between Blue Origin and SpaceX, with both companies competing for similar contracts. The strained personal relationship between SpaceX CEO Elon Musk and Blue Origin founder Jeff Bezos is also mentioned in the lawsuit.

The lawsuit was filed with Delaware’s Court of Chancery, bringing attention to the alleged lack of due diligence in Amazon’s Project Kuiper launch contracts. The case has made waves in the business world since its recent emergence.

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