Sierra Space is laying off hundreds in its Dream Chaser launch campaign

Sierra Space, one of the most valuable private companies in the sector, laid off several hundred employees and contractors this week, CNBC has learned.

A Sierra Space spokesperson confirmed that the company laid off about 165 employees on Thursday, but declined to specify the number of contractors affected. Former Sierra Space employees told CNBC that the layoffs included a large number of contractors, with cuts affecting hundreds of employees in total.

Laid-off employees received two weeks’ paid no-work notice, plus four weeks of severance pay and health care benefits through the end of the year. Sierra Space had about 2,000 employees before reducing its workforce, a company spokesman said.

The Colorado-based company, recently valued at more than $5 billion, is seeking to launch the long-awaited first mission of its Dream Chaser spaceplane.

Sierra Space this week shipped its first Dream Chaser vehicle, named Tenacity, for pre-launch testing at NASA’s Armstrong facility in Ohio. A Sierra Space spokesman said layoffs began shortly after, noting that the company made a significant hiring increase this year to complete work on the Tenacity spacecraft.

With Tenacity shipping, a Sierra Space spokesperson said the company is reorganizing to focus on the operations phase of the first Dream Chaser mission, as well as on classified national security work.

The latest part of Sierra Space’s reorganization includes the addition of approximately 150 security-cleared employees from Sierra Nevada Corp., the aerospace and defense contractor owned by Sierra Nevada Corp. Light And Erin OzmanWhich the space company separated from two years ago. A Sierra Space spokesman said the company is creating a national security space team to work on several classified contracts.

Sierra Space also recently lost two top executives before layoffs: COO Jeff Babione, who retired, and Space Destinations senior vice president Neeraj Gupta. The company said the two departures were unrelated.

Two months ago, Sierra raised just under $300 million at a valuation of $5.3 billion.

The Dream Chaser has been in development for years with the goal of eventually delivering cargo and crew to low Earth orbit as a reusable vehicle. It looks similar to NASA’s miniature space shuttle, and is designed to launch atop a conventional rocket and land on a runway like an airplane.

The first Dream Chaser vehicle was previously scheduled to launch late last year, but delays in development of United Launch Alliance’s Vulcan rocket pushed back that timeline. The Dream Chaser is scheduled to launch on ULA’s second Vulcan mission, with the first Vulcan launch targeted for December.

Dream Chaser has won NASA contracts to fly seven cargo missions to and from the International Space Station.