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RCAT.US
id: 1611

Red Cat Holdings ($RCAT) Drone Production Hype, Inflated Army Contract, and Insider Stock Sales Case

Investors can submit applications for the lead plaintiff role.
D. New Jersey
Court
2:25-cv-05427
Case number
03/18/2022
Class period Start
01/15/2025
Class period End
07/22/2025
Lead Plaintiff motion deadline
  • $RCAT investors filed a claim against Red Cat Holdings for inflating drone production capabilities and misleading the market about the size of a major U.S. Army contract.
  • After a critical report revealed the SRR contract was worth far less than claimed and exposed years of exaggerated manufacturing claims, $RCAT fell 21.54% on January 16, 2025.
  • $RCAT investors can join this case to be notified about potential recovery.
Case Details:

Between March 18, 2022 and January 15, 2025, Red Cat told investors it could produce “thousands of drones per month” at its Salt Lake City facility and implied it was positioned to secure hundreds of millions to over $1 billion from the U.S. Army’s Short Range Reconnaissance (SRR) program.

In reality, the plant could only produce about 100 drones per month, and its full buildout required further investment. Red Cat’s leadership knew this, but continued to make public statements suggesting mass production was already underway.

The company also overstated the value of its November 2024 SRR contract. Executives suggested up to $79 million in revenue for 2025 alone. However, on January 16, 2025, Kerrisdale Capital released documents indicating that the Army had only allocated $20–25 million annually for the program, including spares and training. Kerrisdale also revealed Red Cat announced the win without Army approval, potentially complicating future negotiations.

On the same day, Red Cat’s stock plunged 21.54%. The report also flagged suspicious insider sales: CEO Jeffrey Thompson and CTO George Matus sold over $14.9 million in stock shortly after the SRR win was announced.

Based on these events, $RCAT investors filed a claim against Red Cat Holdings, accusing the company of the following:
  • It misled investors about the true production capacity of its drone facility and overstated readiness.
  • It exaggerated the expected revenue from the U.S. Army contract by several hundred million dollars.
  • It failed to disclose that the contract announcement lacked Army approval, risking future negotiations.
Considering all the representations, investors believe Red Cat concealed serious operational problems and misled the market to maintain its valuation and growth story.
Case Type
US Securities Class Action
Case Status
Lead Plaintiff Submission
Alleged Offence
Misleading Statements
Financial Misrepresentation
Fraud
Failure to Disclose
Suspected Party
Directors
Management
Security Type
Stocks
Trade Direction
Long
Shock Event Date
01/16/2025
Filing date
05/23/2025
Lead Plaintiff Deadline
07/22/2025

Red Cat Holdings Inc

Red Cat Holdings, Inc., together with its subsidiaries, provides products and solutions to drone industry in the United States. The company offers research and development of software solutions suc...

    Ticker
    RCAT.US
    ISIN
    US75644T1007
    CIK
    0000748268
    Sector
    Technology
    Industry
    Computer Hardware
    Country
    USA
    Address
    15 Avenue Munoz Rivera, San Juan, PR, United States, 00901