The Law Offices of Frank R. Cruz announces that a class action lawsuit has been filed on behalf of investors who purchased Red Cat Holdings, Inc. (“Red Cat” or the “Company”) (NASDAQ: RCAT) securities between March 18, 2022 and January 15, 2025, inclusive (the “Class Period”). Red Cat investors have until July 22, 2025 to file a lead plaintiff motion.

What Happened?

In March 2022, Red Cat announced that its subsidiary Teal Drones, Inc. (“Teal”) had been selected to compete in Tranche 2 of the U.S. Army’s Short Range Reconnaissance Program of Record (the “SRR Program”).

On July 27, 2023, Red Cat released its fiscal year 2023 financial results and revealed that its Salt Lake City Facility could only produce 100 drones per month and that construction of the facility was only “substantially completed” and, while it could potentially reach a production capacity of one thousand drones per month over the next two to three years, it would require additional capital investments.

On this news, Red Cat’s stock price fell $0.10, or 8.9%, to close at $1.02 per share on July 28, 2023, thereby injuring investors.

Then, on September 23, 2024, Red Cat released its first quarter fiscal 2025 financial results, missing consensus estimates and disclosing that it had spent “the past four months . . . retooling [the Salt Lake City Facility] and preparing for high volume production[,]” while admitting that a “pause in manufacturing of Teal 2 and building our Army prototypes impacted Teal 2 sales” because it “couldn’t produce and sell Teal 2 units while retooling [its] factory.”

On this news, Red Cat’s stock price fell $0.80, or 25.3%, over two consecutive trading days to close at $2.36 per share on September 25, 2024.

Then, on November 19, 2024, Red Cat announced that it had won the SRR contract, stating that it was worth potentially hundreds of millions of dollars.

However, on January 16, 2025, Kerrisdale Capital published a report alleging, among other things, that Red Cat had overstated that value of the SRR Contract and that it was worth approximately $20-25 million, based on U.S. Army budget documents.

On this news, Red Cat’s stock price fell $2.35, or 21.5%, over two consecutive trading days to close at $8.56 per share on January 17, 2025, thereby injuring investors further.

What Is The Lawsuit About?

The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (1) the Salt Lake City Facility’s production capacity, and Defendants’ progress in developing the same, was overstated; (2) the overall value of the SRR Contract was overstated; and (3) as a result, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis at all relevant times.