NEW YORK, May 27, 2025 (GLOBE NEWSWIRE) — Gainey McKenna & Egleston announces that a securities class action lawsuit has been filed in the United States District Court for the District of New Jersey on behalf of all persons or entities who purchased the securities of Red Cat Holdings, Inc. (“Red Cat” or the “Company”) (NASDAQ: RCAT) between March 18, 2022 and January 15, 2025, both dates inclusive (the “Class Period”).
The Complaint alleges that Defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (i) the Salt Lake City Facility’s production capacity, and Defendants’ progress in developing the same, was overstated; (ii) the overall value of the SRR Contract with the U.S. Department of Defense was overstated; and (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times.
According to the Complaint on July 27, 2023, Red Cat hosted a conference call with investors and analysts to discuss its financial and operating results for its fiscal year 2023. The Complaint alleges that during the call, Defendants revealed that the Salt Lake City Facility could only currently produce 100 drones per month, and that the facility was still being built, refined, and expanded. The Complaint further alleges that Red Cat filed an annual report on Form 10-K with the SEC the same day, which likewise reported that construction of the facility was only “substantially completed” and potentially could reach a production capacity of one thousand drones per month over the next 2 to 3 years, but only with additional capital investments and manufacturing efficiencies realized.
The Complaint alleges that following these disclosures, Red Cat’s stock price fell $0.10 per share, or 8.93%, to close at $1.02 per share on July 28, 2023.
The Complaint further alleges that on September 23, 2024, Red Cat issued a press release announcing its financial and operating results for the first quarter of its fiscal year 2025. The Complaint alleges that among other results, the Company reported losses per share of $0.17, missing consensus estimates by $0.09, and revenue of $2.8 million, missing consensus estimates by $1.07 million. The Complaint also alleges that on a subsequent conference call that Red Cat hosted with investors and analysts the same day to discuss these results, Company management disclosed that Red Cat 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, inter alia, Red Cat “couldn’t produce and sell Teal 2 units[] while retooling [its] factory.”
According to the Complaint on this news Red Cat’s stock price fell $0.80 per share, or 25.32%, over the following two trading sessions, to close at $2.36 per share on September 25, 2024.
The Complaint alleges that on November 19, 2024, Red Cat issued a press release announcing that it had won the SRR Contract. The Complaint further alleges that on a subsequent conference call that Red Cat hosted with investors and analysts the same day to discuss the contract win, Defendants continued to assert that the SRR Contract was worth potentially hundreds of millions of dollars, while expressing their confidence that Red Cat could realize up to $50 million to $79.5 million in revenue from the SRR Contract during it fiscal year 2025 alone.
The Complaint alleges that on January 16, 2025, Kerrisdale Capital (“Kerrisdale”) published a report (the “Kerrisdale Report”) alleging, inter alia, that Defendants had overstated the value of the SRR Contract, which Kerrisdale found was only worth approximately $20 million to $25 million based on U.S. Army budget documents. The Complaint alleges that the Kerrisdale Report also alleged that Defendants had been misleading investors about the Salt Lake City Facility’s production capacity for years, while also raising concerns about the timing of executive departures and insider transactions that took place shortly after Red Cat announced it had won the SRR Contract.
The Complaint alleges that on this news, Red Cat’s stock price fell $2.35 per share, or 21.54%, over the following two trading sessions, to close at $8.56 per share on January 17, 2025.
According to the Complaint as a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages.
Investors who purchased or otherwise acquired shares of Red Cat should contact the Firm prior to the July 22, 2025 lead plaintiff motion deadline. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. If you wish to discuss your rights or interests regarding this class action, please contact Thomas J. McKenna, Esq. or Gregory M. Egleston, Esq. of Gainey McKenna & Egleston at (212) 983-1300, or via e-mail at tjmckenna@gme-law.com or gegleston@gme-law.com.
Please visit our website at http://www.gme-law.com for more information about the firm.
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