Firefly halts launch preparations after federal government seeks divestment of foreign ownership

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WASHINGTON — Firefly Aerospace is pausing preparations for its next Alpha launch, originally scheduled for early 2022, after the government asked its largest shareholder to divest its stake for national security reasons.

Noosphere Venture Partners, a fund run by Ukrainian-born investor Max Polyakov, said Dec. 29 that it will retain an investment banking firm to sell its interest in Firefly. That sale comes at the request of the Committee on Foreign Investment in the United States (CFIUS), the company said. Bloomberg was the first to report Noosphere’s plans.

Firefly, in a statement to SpaceNews, said that, because of that request, it is holding off on preparations for its second Alpha launch. “During this process, the government has made a decision to limit our operations at Vandenberg Space Force Base while this issue is being resolved,” it stated. “Firefly is actively working with our government partners to mitigate any regulatory issues that may impact launch operations.”

Space Launch Delta 30, the Space Force unit responsible for launch activities at Vandenberg, did not respond to a request for comment Dec. 29 regarding that pause on Firefly launch preparations.

Polyakov acquired the assets of the former Firefly Space Systems in 2017 after it filed for bankruptcy. He invested $200 million to resurrect the company and allow it to continue development of its Alpha small launch vehicle, which made its first orbital launch attempt in September. Noosphere said in its statement that it owns an “approximately 50% stake” in Firefly.

It’s unclear what prompted the CFIUS request for Noosphere to sell its stake in Firefly, although the company speculated in its statement that it was linked to growing tensions between Russia and Ukraine, including concerns in recent weeks Russia would attempt in invade Ukraine. “Noosphere Ventures is working diligently to address CFIUS’s concerns in the most efficient and appropriate manner possible,” it said in a statement provided to SpaceNews.

Polyakov’s ownership stake had not been a serious issue for Firefly in the past. The company secured access to Space Launch Complex 2W at Vandenberg for its Alpha launch vehicle. It also won NASA contracts, such as an award from the Commercial Lunar Payload Services program for a lunar lander mission scheduled for 2023.

Firefly, though, had been de-emphasizing Polyakov’s role in the company before the CFIUS notice. When the company raised a $75 million Series A round in May, Noosphere sold an additional $100 million of its shares in Firefly, a move it said was to satisfy “overwhelming demand” from investors. Polyakov was also quietly dropped from the board of directors last year, which now includes former U.S. government officials such as Deborah Lee James, former secretary of the Air Force, and Robert Cardillo, former director of the National Geospatial-Intelligence Agency.

Before the government decision to halt Firefly launch preparations, the company had been gearing up for an Alpha launch as soon as late January. In an interview in November, Jason Mello, president of Firefly Space Transportation Services, the Firefly subsidiary responsible for Alpha launch sales, said the premature engine shutdown that doomed the first launch had a “fairly easy and straightforward” solution. He said the company would conduct up to four more Alpha launches in 2022 if the upcoming launch was a success.

Firefly did not mention in its statement how long of a delay it projected for its next launch because of the sale of Noosphere’s stake. “Our plans for multiple flights in 2022 are continuing with the finalization of Flight 2 testing and preparation for transport, along with the development of Flight 3 and 4 vehicles, which are currently in production,” the company stated.

Firefly is not the first space company to be tripped up by national security concerns regarding foreign ownership. Momentus, which is developing a line of space tugs, was unable to get a Federal Aviation Administration payload review for its first mission in early 2021 because of government objections to its Russian co-founders, Mikhail Kokorich and Lev Khassis. That issue, which delayed its merger with a special purpose acquisition company, led to Kokorich and Khassis selling their stakes in the company.

Momentus said in November that it was making “significant progress” on implementing a national security agreement with the federal government and was on track to get approvals for launching its first tug in the middle of 2022.