Street Calls of the Week
Investing.com -- Red Cat Holdings (NASDAQ:RCAT) stock fell 2% Friday after short seller Fuzzy Panda Research published a report claiming the drone maker misled investors about key contracts and product capabilities.
The short report alleges that Red Cat’s Army contract is approximately 60% smaller than what management had claimed to investors. According to Fuzzy Panda, Army officials confirmed the Low-Rate Initial Production contract is worth only $12.9 million, far below the $30-55 million figure that analysts and management had suggested.
The report also questions Red Cat’s ability to meet its fiscal year 2025 guidance of $80-120 million in revenue. With current annualized revenue of approximately $10 million and the Army contract at $12.9 million, Fuzzy Panda argues the company faces a significant shortfall of around $57 million from even the lower end of its guidance range.
Additionally, the short seller claims Red Cat’s new FANG drone is merely "a marketing concept" made with Chinese components, rather than a proprietary product. The report includes images allegedly showing the FANG drone using parts from Chinese manufacturers and suggests it is essentially a rebranded version of another company’s product.
Fuzzy Panda also challenged Red Cat’s recent announcement about joining NATO’s catalogue, stating that the company’s drones have actually been in the NATO catalogue since November 2023 but have generated minimal sales during that time.
The short seller compared Red Cat to failed companies like Electric Last Mile Solutions and Nikola, both of which faced accusations of misrepresenting their products before ultimately collapsing.
Red Cat has not yet publicly responded to the allegations in the report.
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