Pomerantz Law Firm Announces the Filing of a Class Action Against Red Cat Holdings, Inc. and Certain Officers - RCAT

NEW YORK, July 12, 2025 /PRNewswire/ -- Pomerantz LLP announces that a class action lawsuit has been filed against Red Cat Holdings, Inc. ("Red Cat" or the "Company") (NASDAQ: RCAT) and certain officers.  The class action, filed in the United States District Court for the District of New Jersey, and docketed under 25-cv-05427, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Red Cat securities between March 18, 2022 and January 15, 2025, both dates inclusive (the "Class Period"), seeking to recover damages caused by Defendants' violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials.

If you are an investor who purchased or otherwise acquired Red Cat securities during the Class Period, you have until July 22, 2025 to ask the Court to appoint you as Lead Plaintiff for the class.  A copy of the Complaint can be obtained at www.pomerantzlaw.com.   To discuss this action, contact Danielle Peyton at [email protected] or 646-581-9980 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased. 

[Click here for information about joining the class action]

Red Cat, together with its subsidiaries, provides various products, services, and solutions to the United States ("U.S.") drone industry.  The Company's products include, inter alia, the "Teal 2" drone, a small, unmanned aircraft system ("sUAS") designed to purportedly "Dominate the Night" during nighttime military operations.

Red Cat manufactures its drones through its subsidiary Teal Drones, Inc. ("Teal") at a facility located in Salt Lake City, Utah (the "Salt Lake City Facility").  Throughout 2022, Defendants touted their development of the Salt Lake City Facility's capacity to produce "thousands of drones per month" or "tens of thousands of drones" per year.

In March 2022, Red Cat announced that Teal had been selected by the U.S. Department of Defense's Defense Innovation Unit and the U.S. Army to compete in Tranche 2 of the U.S. Army's Short Range Reconnaissance Program of Record (the "SRR Program").  The SRR Program is a U.S. Army initiative to provide a small, rucksack-portable sUAS to U.S. Army platoons.

At all relevant times, Defendants suggested or otherwise asserted that the SRR Program's Tranche 2 contract (the "SRR Contract") was worth potentially hundreds of millions to over a billion dollars in contract revenues.

In March 2023, Company management confirmed that "[t]he Salt Lake City factory is complete and ready to go" and "[w]e now have the capacity to produce thousands of drones per month."

The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and prospects.  Specifically, Defendants 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 was overstated; and (iii) as a result, Defendants' public statements were materially false and misleading at all relevant times.

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.  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.  Red Cat filed an annual report on Form 10-K with the U.S. Securities and Exchange Commission 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.

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.

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.  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.  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."

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. 

On November 19, 2024, Red Cat issued a press release announcing that it had won the SRR Contract.  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.

Then, 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 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.

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.

Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered billions of dollars in damages awards on behalf of class members. See www.pomlaw.com.

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CONTACT:
Danielle Peyton
Pomerantz LLP
[email protected]
646-581-9980 ext. 7980sec

SOURCE Pomerantz LLP