YSS: Lost In Space — The Pentagon Just Killed 96% of York’s Revenue

We are short York Space Systems Inc. (“York”) as 96% of 2025 revenue came from selling satellites to one customer: the Pentagon’s Space Development Agency (SDA), and that customer is being eliminated. York’s IPO was predicated on the idea that they would continue to experience explosive growth as the “incumbent” provider for the SDA’s Transport Layer program. In late April, the Pentagon announced it had wiped out future funding for the SDA’s Tranche 3 Transport Layer and is dissolving the SDA itself for good measure, effectively gutting the program upon which York based its growth thesis in its January IPO. This is not a freeze, nor a hiccup. The program York relied on is being replaced by a program built around SpaceX as the sole-source provider. We spoke with multiple former employees who were highly critical of York and heard claims that York deceived the SDA with false advertising to win its contracts, cut corners, and delivered satellites whose mission-critical-software was not completed. Given this context, we believe the Pentagon’s decision to eliminate Tranche 3 Transport Layer (“Tranche 3”) was rooted in severe disappointment in York.

The Pentagon has opted to replace the SDA’s Transport Layer program with the Space Data Network (SDN). Bulls might argue vendors of the SDA Transport Layer program, like York, can switch over to the SDN; however, the truth is buried in the Pentagon’s dense, so-called “J-Books.” These documents, which are dense but include rich detail on the Pentagon’s spending plans, were made public April 28th and indicate SpaceX is the incumbent provider for the SDN backbone, with Starshield named explicitly in the FY 2027 budget and no competitive solicitation for a second backbone satellite vendor.

York’s CEO denied the Transport Layer was being effectively terminated after their latest earnings call before the Pentagon officially made its position known. But what will he say on the May 14th call now that the funding for Tranche 3 has moved to a sole-sourced program where SpaceX is the incumbent? We believe retail investors who bought York as a play on a SpaceX IPO will experience a massive rug-pull. As one former said, “I’m waiting for [York] to implode.”

York has relied upon the SDA for over 90% of its revenue annually. York’s major program with the SDA is selling Transport Layer satellites to the SDA’s Proliferated Warfighter Space Architecture (PWSA) program. York claims to be the largest awardee by satellite volume for Tranches 0, 1, and 2. Each tranche has scaled larger, driving York’s 52% YoY revenue growth. York’s future growth prospects depend on being awarded a share of the SDA’s next tranche for this program: Tranche 3. But the Pentagon has terminated funding for Tranche 3, zeroing out York’s future opportunities.