The COTS contract is a huge one for the small companies that were involved, and it would have brought tremendous upside to SpaceDev. But SPDV was not built to win this one contract, and the company is set up to be sustainable without any one contract.
Still, it's disappointing news. The news was much better for Rocketplane Kistler and SpaceX -- both of which, coincidence or no, are private companies. One is the result of a merger this past spring between Rocketplane ltd. and Kistler Aerospace, and SpaceX is the pit into which Paypal founder Elon Musk throws his money. SpaceX, actually, is key to the potential of SpaceDev's private microsatellite program, as they have already contracted for a launch of the (still not operational) SpaceX Falcon launch vehicle to bring a payload of SpaceDev microsatellites into orbit.
Rocketplane Kistler arguably has the design that's most like SpaceDev's DreamChaser, in that it's based on a spaceplane design somewhat like a smaller version of the current shuttle, so if there was a spot for SpaceDev on this contract I expect we have Rocketplane to blame for them not getting it. SpaceX's Dragon spacecraft is essentially a capsule that rides on the Falcon launch vehicle.
It's hard to argue with NASA's decision -- they're hedging their bets with two designs, and while I wish they would have selected SpaceDev's design I don't know of any technical reasons why it would have been a better choice -- and SpaceDev is one of the smaller and less experienced companies in the mix, so a win was always a long shot (even if I was a bit more optimistic earlier).
But while this contract would have been a huge positive for SpaceDev, the loss of it does not mean the company is in particular trouble -- as you can see by the fairly benign 5% drop in SPDV shares today, compared to the 23%+ drop of the shakier SpaceHab (NYSEARCA:SPAB) even though they're also involved in the SpaceX contract team. T/Space and Andrews, the other two finalists, are also privately owned (and significantly younger than SpaceDev).
So it's unfortunate, but it's not a deal breaker. It's encouraging that there clearly wasn't much hype over COTS built into the SPDV price, which is how I read today's tepid decline, but I will be watching SpaceDev closely over the next quarter or two as they continue integrating Starsys and winning contracts and subcontracts for their satellite, propulsion, robotics and mechanical space work. I continue to believe that the company is stable and has a bright future, and is reasonably priced given their current sales and technological capability, but if they fail to continue growing their contract pipeline significantly that future will dim considerably.
SPDV 1-yr chart: