I was there with KSP from the early days. Squad was not in the video game business, they were a billboard advertisement company. The lead dev HarvesteR started it as a passion project. It found success with the alpha and full release in 2015.
Then in 2017 Take-Two bought the rights to the game. Squad kept working on the original, but development of the sequel was handed off to Star Theory with Private Division publishing. The game was delayed, then development was moved to a new studio, Intercept Games, which was owned by Take-Two. They also poached a third of Star Theory's personnel, which resulted in the studio's death. They fucked around for a few years, released the early access version, then sold Private Division, closed Intercept Games, and abandoned the game.
In short: corporate interests. KSP2's failure had nothing to do with KSP or its developers.