Red Cat Holdings Falls After Fuzzy Panda Shorts Stock Over Alleged Drone Misrepresentation

Short seller Fuzzy Panda said Friday it is short Red Cat Holdings (RCAT), citing misleading claims by the drone maker. 

Red Cat’s stock fell as much as 5% at market open. On Stocktwits, retail sentiment around the stock remained in ‘bullish’ territory even as chatter dipped to ‘normal’ from ‘high’ levels over the past day.

Fuzzy Panda alleged that Red Cat overstated the size of a key Army contract by roughly 60% and misrepresented its new FANG drone as a market-ready product. Images reportedly show FANG built with Chinese components and parts sourced from an older drone. The firm also noted that RCAT drones have been listed in NATO’s catalogue for nearly two years without generating significant sales.

The short seller said the U.S. Army confirmed that Red Cat’s Low Rate Initial Production(LRIP) contract is worth $12.9 million, far below CEO Jeffery Thompson’s claim of $55 million. During the company’s August earnings call, Red Cat had promoted the contract as enough to hit the low end of its FY 2025 guidance of between $80 and $120 million. Fuzzy Panda called the guidance unrealistic, noting the company’s total revenue to date is $4.9 million.

The short seller’s concerns extend to Red Cat’s new FANG drone. It said legal filings described FANG as “a marketing concept,” with the product not even ready for demonstration at an Army fly-off event in August 2025. 

Fuzzy Panda also pointed to recent promotional materials that show the Red Cat’s drone is largely sourced from Unusual Machines’ (UMAC) Rotor Riot, including key components made in China. 

“When a paid stock promotion jumps on hype of future contracts, slapped together prototypes and misleading statements about their actual contracts it presents a great opportunity to sell the stock,” the research firm said.

Red Cat’s stock has gained more than 17% this year and nearly 340% over the past 12 months.

Read also: EightCo Stock Jumps After Launch Of AI Authentication Pilot For Enterprises

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