Red Cat Holdings, Inc. (RCAT) Securities Class Action Lawsuit Update [June 24, 2025]

Introduction  to Red Cat Holdings, Inc. (RCAT) Securities Lawsuit

A securities fraud class action lawsuit has been filed against Red Cat Holdings, Inc. (“Red Cat”) (NASDAQ: RCAT) on behalf of investors who purchased Red Cat securities between March 18, 2022, and January 15, 2025 (the “Class Period”). The complaint alleges that Red Cat and certain senior executives violated federal securities laws by making materially false and misleading statements regarding the company’s drone manufacturing capabilities and the projected value of a key U.S. Army contract. 

Red Cat Holdings, Inc. (RCAT) Lawsuit Case Details  

Olsen v. Red Cat Holdings, Inc., et al.  

Case No.: 2:25-cv-05427 

Jurisdiction: U.S. District Court, District of New Jersey 

Filed on: May 23, 2025 

 Red Cat Holdings, Inc. (RCAT) Company Profile  

Red Cat Holdings, Inc. is a drone technology company.  Its subsidiary Teal Drones manufactures small unmanned aircraft systems (sUAS).  It manufactures the Teal 2 drone for military and defense applications. Red Cat operates a Salt Lake City production facility and is a key supplier to the U.S. Defense Department. 

Class Period:  

March 18, 2022 to January 15, 2025, inclusive 

Investors who purchased Red Cat securities during the class period might be eligible to join the Red Cat Holdings Inc. lawsuit. 

Allegations  in the Red Cat Holdings, Inc. (RCAT) Lawsuit

Plaintiffs claim Red Cat misled investors about two critical aspects of its business: the production capacity of its Salt Lake City facility and the projected value of its SRR Program contract with the U.S. Army. 

Beginning in March 2022, Red Cat executives repeatedly told investors that the Salt Lake City facility was either complete or nearing full-scale production. On multiple earnings calls and in press releases, CEO Jeffrey Thompson and other executives claimed the company could produce “thousands of drones per month” and was ready to “hit the ground running” if awarded the SRR contract. These statements were echoed in the company’s 2022 and 2023 Form 10-K filings, which described the facility as fully scaled or substantially completed. 

However, on July 27, 2023, Red Cat disclosed during its FY2023 earnings call that the facility’s actual production capacity was only 100 drones per month and that it remained under construction. The accompanying 10-K confirmed that maximum capacity would not reach 1,000 drones per month for another two to three years—and only with additional capital investment and operational efficiencies. The stock fell nearly 9% on the news. 

Despite this, Red Cat continued to promote the SRR contract as a transformative opportunity. In November 2024, after announcing it had won the contract, executives claimed the deal could generate over $260 million in revenue, with up to $79.5 million expected in fiscal 2025 alone. On the November 19 investor call, executives cited a $45,000 per-unit price and a stated acquisition objective of 5,880 systems, while also projecting additional revenue from spares, training, and maintenance. 

The filed complaint alleges Red Cat and its executives violated the Securities Exchange Act.  The complaint says that Red Cat’s misleading statements and omissions artificially inflated the company’s stock price, triggering investors losses when the truth came out. Plaintiffs also argue Red Cat’s leadership knew or should’ve known that its production capacity and revenue projections were overstated, and that its public statements misled investors about the company’s operational readiness and financial outlook 

The Truth Emerges 

On January 16, 2025, Kerrisdale Capital published a report challenging these claims. Citing U.S. Army budget documents, the report estimated the contract’s actual value at just $20–25 million annually, including all ancillary services. It also alleged that Red Cat had improperly announced the contract without Army approval, putting the whole deal at risk. The report also pointed out that Red Cat had spent less than $1 million on capital improvements over two years.  That raised major questions about its ability to scale up. The same day, Red Cat’s stock plunged over 21%. 

The complaint also highlights suspicious insider activity. Between December 20 and December 27, 2024—just weeks after the SRR contract was announced—several executives, including Thompson, CFO Leah Lunger, and Teal founder George Matus, collectively sold over $16 million in stock, which raised some eyebrows. Matus resigned shortly thereafter.  

Plaintiffs allege that Red Cat’s leadership knew or should have known that its production capacity and revenue projections were overstated, and that its public statements misled investors about the company’s operational readiness and financial outlook 

Market Reaction 

Red Cat’s stock crashed more than 50% across three major disclosures between July 2023 and January 2025, dropping from $11.00 to $8.56 per share in the wake of the Kerrisdale report.  

Next Steps  

• Submissions for lead plaintiff are due July 22, 2025 

• The Court will issue its order for lead plaintiff and counsel in the weeks after the lead plaintiff deadline.    

• The Court will then consider motion for class certification.     

• The Court will later consider a Motion to Dismiss.    

To learn if you are eligible for recovery under the Red Cat Holdings securities class action lawsuit, visit the case submission page here.

Disclaimer: This shareholder alert is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for personalized guidance. No specific outcomes are guaranteed.