The complaint alleges that, throughout the Class Period, Red Cat Holdings, Inc. made materially false and misleading statements about its business, particularly overstating the production capacity of its Salt Lake City Facility and the value of its SRR Contract. On July 27, 2023, the company disclosed that the facility could only produce 100 drones per month and was still under construction, leading to an 8.93% stock price drop. On September 23, 2024, Red Cat reported disappointing Q1 2025 results, with a $0.17 per share loss and $2.8 million in revenue, missing estimates, and admitted to a manufacturing pause, causing a 25.32% stock price decline over two days. On November 19, 2024, despite announcing the SRR Contract win and projecting $50 million to $79.5 million in revenue for 2025, a January 16, 2025, Kerrisdale Capital report claimed the contract was worth only $20 million to $25 million and highlighted ongoing misrepresentations about the facility’s capacity. This report triggered a 21.54% stock price drop over two trading sessions, closing at $8.56 per share on January 17, 2025.
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