Author name: Kelly Newman

Two years after he founded his space company in the summer of 2004, Jeff Bezos penned a letter that greeted new employees with the message, “Welcome to Blue Origin!” A copy of this letter was subsequently given to new employees for nearly two decades.

At one point in the letter, Bezos questioned whether Blue Origin was a good investment.

“I accept that Blue Origin will not meet a reasonable investor’s expectations for return on investment over a typical investing horizon,” Bezos wrote. “It’s important to the peace of mind of those at Blue to know I won’t be surprised or disappointed when this prediction comes true. On the other hand, I do expect that over a very long-term horizon—perhaps even decades from now—Blue will be self-sustaining and operationally profitable, and will yield returns.”

Decades later, Blue Origin is still not operationally profitable. Although the company’s finances are not public, by various estimates, Bezos is still investing at least a few billion dollars annually to keep the lights on.

Recently, Blue Origin has made impressive strides and seen financial returns from the sale of BE-4 engines and commercial launches, such as a forthcoming mission for AST SpaceMobile on its New Glenn rocket. However, as revenues rise, so have expenses, with the company continually expanding its facilities and workforce, now totaling more than 11,000 employees.

Top aerospace engineers and technicians do not come cheap, and Blue Origin competes in a heated market for the best talent. Bezos has a lot to offer prospective employees: a compelling mission, high salaries, a demanding but not suffocating work environment, and more. But when it comes to one key aspect of retaining talent, Blue Origin rates far behind the rest of the industry.

Imagine you are a super-bright rocket scientist. A decade ago, you and a buddy both graduated from the University of Southern California as hotshot engineers. You had your pick of space companies. Your friend went to SpaceX and climbed the ladder there into a senior engineering role. You followed a similar arc at Blue Origin. Along the way, your friend racked up stock options that, after SpaceX goes public in the next year, may be worth tens of millions of dollars.

But what about you? How much are your stock options at Blue Origin worth? The answer to this (spoiler alert: zero) raises questions about Blue Origin’s competitiveness in an increasingly competitive space industry.

Equity incentive plan

From the beginning, SpaceX offered employee stock options. Initially, employees did not place too much value in them. For example, Bob Reagan was a machinist hired to lead the company’s in-house manufacturing, and later oversaw the build-out of the company’s large factory in Hawthorne, Calif. SpaceX founder Elon Musk gave Reagan a hard deadline of October 2007 to have the building ready for move-in, and the machinist exhausted himself to have everything ready. His reward? Stock options.

“He gave me a ten-thousand-share bonus, and I was so pissed off because I thought that was nothing,” Reagan told me in the book Liftoff. Several years later, Reagan was able to retire wealthy. Laughing at the memory of his anger about the options in an interview in 2019, Reagan said of Musk, “I guess he took care of me.”

Over the years, SpaceX employees have been able to periodically sell stock options at private liquidity events, when SpaceX sought to raise money from the capital markets. Those shares will become even more valuable when the company goes public, with many engineers becoming worth tens or even hundreds of millions of dollars.

As stock-option plans became more common in the space industry, Blue Origin sought to offer its own plan a decade ago. Launched on February 22, 2016, the “Blue Origin Equity Incentive Plan” gave employees the chance to “participate in Blue Origin’s growth and success, and to encourage them to remain in the service of Blue Origin.”

The 19-page document outlining the terms of this plan laid out the rules of the stock option plan. In some ways, the plan was fairly conventional, but in other ways, it was markedly different from most plans out there. Perhaps the biggest change from most plans was this: “All Options, whether vested or unvested, shall expire on the tenth anniversary of their Vesting Commencement Date unless such Options expire earlier.”

In other words, regardless of whether an employee remained with the company, all options expired after 10 years from the date of issuance. The first options expired last month.

There was another problem with the Blue Origin plan. Stock options could only be exercised “upon a liquidity event,” which was defined as a sale of the Blue Origin business or an Initial Public Offering. Neither of which has happened.

Initial excitement turns into frustration

Blue Origin offered options initially at a strike price of $4 a share, meaning that if there were a liquidity event at something like $10 a share, employees could exercise their options and sell their shares at a significantly higher price. Over the years, this strike price increased to $5.36 a share, still a good deal.

Most employees tucked these options away, not expecting too much from them. If anything, several current and former employees said, they were viewed as a lottery ticket. It was typical for an employee to receive 2,000 shares initially, which would grow over a decade to 10,000 shares.

Employees always understood Bezos was unlikely to sell the company or bring on new investors. But they were nonetheless interested. During Blue Origin’s company-wide town halls, one or two questions would invariably come up about stock options. The answers were always the same: There were no expectations of a liquidity event.

In the years following 2016, perception of the options as an “incentive” began to sour, especially as Blue Origin employees saw peers at other space companies cash in options for meaningful rewards. At SpaceX, even long-time baristas could end up millionaires. Blue employees began to refer to their options as “Monopoly money” with increasing scorn.

When Blue Origin awarded those first options in 2016, the company was still fairly small, having just begun its transition to a large aerospace player. Only a few hundred employees remain a decade later from that initial round, and they are some of Blue’s most dedicated engineers, the people who built the engines and rockets powering the company’s recent success. Now their options have been yanked away.

It would be simple enough to extend the options to at least allow employees to retain some hope. That’s all that many of the people who have stuck with the company for so long have asked for. However, in response to requests to extend the options, Blue issued a form letter that essentially said, “Sorry.” For many of these employees, it feels like a betrayal.

“It’s a big fat middle finger for those that thought they had something, and now they are stuck with empty pockets after spending years working here,” a current employee told Ars.

Blue Origin did not respond to a request for comment on its original equity incentive plan.

Retention may be a challenge

In the early years, before the program’s perception changed, the incentive plan proved a useful recruiting tool. Some employees, especially for a few years after 2016, negotiated lower salaries in favor of more stock options. For these employees, the expiring options are not just a lost lottery ticket but have significantly dented their earning power.

Over time, Blue Origin recruiters stopped emphasizing the options package as part of the company’s benefits. On May 1, 2023, the company told employees it would no longer issue options.

The reasons cited for this were curious. The company told employees that, after a recent review, it had determined that offering equity as part of a hiring package was no longer appropriate. An FAQ further stated that a finite number of shares were available, and that as the company rapidly grew (this was during an intense period when Blue sought to bring the BE-4 rocket engine online and build the New Glenn rocket), it ran out of shares.

Employees wondered whether there would be any other form of compensation or equity offered as an incentive to stay at Blue Origin?

Since then, the issue has not gone away, and long-term incentives remain a question that pops up at town hall meetings with the company’s relatively new chief executive, Dave Limp. He has offered a variety of platitudes that boil down to, “We are looking into things.”

It turns out Limp was telling the truth. On Monday, he emailed the entire company, revealing Blue had created a new stock option plan.

“We are at a pivotal inflection point in our journey to become a world-class manufacturing company, producing at rate and consistently delivering products and services for our customers,” Limp wrote. “We cannot accomplish this without employees that demonstrate high ownership, are driven to achieve our most critical goals, and are motivated to build enduring value at Blue.”

The company will begin granting stock options to employees this spring. “This program is structured to provide opportunities for liquidity events enabling each of you to convert vested stock options into realized value,” Limp wrote.

He promised to offer more information during a company-wide meeting on April 17. It is unclear what will happen to the options under the original equity plan.

The details will matter

In the hypercompetitive aerospace industry, where there is a constant battle to recruit and retain talented engineers, such compensation matters.

Blue Origin has greatly expanded its facilities in Florida, on the Space Coast, where it assembles and launches New Glenn rockets, and is building a series of lunar landers. In this area, the company must compete not just with SpaceX—which is building large launch towers and mega-factories for its Starship vehicles—but also with new space companies such as Relativity Space and Stoke Space, as well as NASA and traditional space powers such as United Launch Alliance.

The competitive nature of the industry has been going on for a long time. In the mid-2010s, as Blue Origin began scaling up, it hired a number of engineers from SpaceX who had experience with building and launching the Falcon 9 for similar operations with New Glenn. Blue Origin lured them away with higher salaries and a (somewhat) more relaxed work environment.

“The folks that left SpaceX to go to Blue are bitter,” one industry source said. “Yes, they got higher pay, but they worked like crazy. And now that they got New Glenn off,  they’re wondering where’s their bonus?”

Weeks after the successful launch of New Glenn, Blue Origin instead cut its workforce by 10 percent.

The email from Limp did not provide details about the new plan, other than saying, “As Blue achieves its goals and increase in value your equity will grow alongside it.”

To compete with SpaceX, Blue must continue to grow. The exact numbers that SpaceX will target with its IPO have not been set, but the company is likely to seek a valuation in the vicinity of $1.5 trillion, which would raise between $30 billion and $50 billion in cash. This is on top of SpaceX’s estimated 2026 revenue of $22 billion to $24 billion.

This gives SpaceX CEO Elon Musk a massive pile of capital to throw at his Starship rocket, Starlink constellation, AI, and orbital data centers.

Bezos has expressed an interest in all of these technologies, too, with his 9×4 New Glenn rocket, lunar lander program, TeraWave constellation, and space-based data centers.

But—and yes, this is a strange thing to write about one of the top five richest people in the world—Bezos does not have the resources to match SpaceX. Blue Origin’s annual revenues are not publicly known, but they are likely on the order of $1 billion a year. Bezos is pumping multiples of that annually to fund the company, but this total is still dwarfed by SpaceX’s annual revenue. And that’s before an IPO.

Until a few years ago, Bezos could more or less match the revenues SpaceX had available with annual contributions to Blue Origin. Both companies had a workforce of over 10,000 people and broad ambitions. But as Starlink sprints ahead, and with an IPO on the horizon, SpaceX is taking a significant leap upward.

All of this raises the possibility that Bezos may finally consider taking on outside investment if he wants Blue Origin to remain competitive with SpaceX.

“He’s never really talked about going for outside investment,” said Chris Davenport, author of Rocket Dreams, about Bezos. “The fact that Elon has had a number of liquidity events is going to put some pressure on Jeff and Blue Origin to at least think about it.”