Red Cat Class Action Lawsuit: Infuriated Investors Smack Red Cat with a Securities Fraud Class Action Lawsuit [2025]

The Red Cat Lawsuit centers on Red Cat’s misleading claims about its drone manufacturing capabilities and a military contract’s value. The company claimed its Salt Lake City facility could make “thousands of drones per month,” but the real capacity turned out to be just 100 drones monthly. The company’s promotion of its cat army technology contract (the SRR Contract) suggested it was worth hundreds of millions. However, Kerrisdale Capital later revealed its true value was only $20-25 million.

Investors have until July 22, 2025, to submit their lead plaintiff motion in the Red Cat Class Action Lawsuit. The lawsuit wants to recover damages for everyone who bought Red Cat securities during this period. The company’s financial health has raised red flags among stakeholders and market analysts. This comes after reporting a $0.17 loss per share in the first quarter of fiscal year 2025, missing consensus estimates by $0.09, and revenue of just $2.8 million that fell short by $1.07 million.

Investor Files Red Cat Class Action Against Red Cat Lawsuit

A Red Cat investor announced a major securities fraud class action against drone manufacturer Red Cat Holdings, Inc. on May 24, 2025. The Red Cat Lawsuit came after several disclosures that showed the company’s management made false statements.

Who is involved in the Red Cat lawsuit?

The lawsuit names Red Cat Holdings, Inc. (NASDAQ: RCAT) and “certain of its top officials” as defendants. The case, Olsen v. Red Cat Holdings, Inc., received case number 25-cv-05427.

What are the key allegations in the Red Cat lawsuit?

The Red Cat Lawsuit focuses on two main claims of securities fraud:

1. Production Capacity Misrepresentation: Red Cat allegedly made false and misleading statements about its Salt Lake City facility’s production abilities and progress. The company claimed substantial manufacturing capabilities. Later revelations showed the facility could only make 100 drones monthly, remained under construction, and needed years of extra investment to reach stated capacity.
2. Contract Value Inflation: The plaintiffs claim Red Cat substantially overstated its Short Range Reconnaissance Program of Record Tranche 2 contract (SRR Contract) with the U.S. Department of Defense. The company promoted this as a deal worth “hundreds of millions of dollars.” Kerrisdale Capital discovered U.S. Army budget documents showing the actual value at approximately $20-25 million.

The Red Cat Class Action Lawsuit states these misrepresentations broke Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Investors want to recover losses that happened when these revelations caused the company’s stock price to drop.

When and where was the Red Hat class action lawsuit filed?

The United States District Court for the District of New Jersey received the Red Cat Class Action Lawsuit. The case covers anyone who bought Red Cat securities from March 18, 2022, through January 15, 2025.

Affected investors must file lead plaintiff motions by July 22, 2025. Lead plaintiffs can guide the litigation and shape settlement talks. This deadline matters if you lost money on Red Cat investments and want to recover damages through the Red Cat Class Action Lawsuit.

It is worth mentioning that new class action participants do not pay upfront fees. Most securities litigation firms like the Law Offices of Timothy L. Miles take payment only after winning damages for class members.

Red Cat Touted Drone Factory and Army Contract

Red Cat Holdings positioned itself as a state-of-the-art American drone manufacturer. The company made ambitious claims about its manufacturing capabilities and government contracts. These statements now form the foundations of the Red Cat Class Action Lawsuit and show how the company allegedly misled investors about its true operational status.

What is the Salt Lake City Facility?

Red Cat’s primary manufacturing hub operated through its subsidiary Teal Drones, Inc at the Salt Lake City Facility. The company used this facility to produce its “Teal 2” drone, a small unmanned aircraft system (sUAS) designed for nighttime military operations. The facility supposedly showcased Red Cat’s dedication to American manufacturing. The company claimed it was “the first to mass produce a drone entirely in the U.S. with Department of Defense-compliant components”.

Company management made bold statements about the facility’s readiness in March 2023. They claimed that “The Salt Lake City factory is complete and ready to go”. The facility served as the life-blood of Red Cat’s ability to fulfill military contracts, especially their participation in the U.S. Army’s Short Range Reconnaissance Program.

How was the SRR Program presented to investors?

Teal received selection from the U.S. Department of Defense’s Defense Innovation Unit and the U.S. Army in March 2022. The selection allowed them to compete in Tranche 2 of the U.S. Army’s Short Range Reconnaissance Program of Record (SRR Program). Executives portrayed this chance in remarkably lucrative terms.

The SRR Program aimed to “provide a small, rucksack-portable sUAS to U.S. Army platoons”. Notwithstanding that, Red Cat’s most important presentations focused on the contract’s purported value. Company statements “suggested or otherwise claimed that the SRR Program’s Tranche 2 contract was worth potentially hundreds of millions to over a billion dollars in contract revenues“.

Red Cat projected potential revenues from the SRR Contract would reach USD 50.00–USD 79.50 million for FY2025 alone in November 2024. The company described this as “a lucrative USD 400.00 million, five-year sole-source contract with the US Army”.

What claims were made about production capacity?

As emphasized in Red Cat Class Action Lawsuit, the Red Cat executives made bold claims about the Salt Lake City Facility’s manufacturing capabilities throughout 2022:

• They highlighted “development of the Salt Lake City Facility’s capacity to produce ‘thousands of drones per month‘”
• They also claimed capacity for “tens of thousands of drones per year”
• Management specifically confirmed in March 2023, “We now have the capacity to produce thousands of drones per month“

These production capacity claims strengthened Red Cat’s value proposition by suggesting their ability to fulfill large-scale military contracts. The company emphasized its manufacturing scalability to meet the Army’s “currently stated acquisition objective for 5,880 systems” over the program’s five-year period.

Red Cat reinforced these manufacturing claims through partnership announcements. Their May 2025 collaborative effort with ESAero aimed to “provide critical AS9100 manufacturing capacity”. Red Cat’s CEO Jeff Thompson stated this partnership would help them “scale manufacturing” and “deliver mission-ready sUAS platforms to the warfighters”.

Disclosures Reveal Gaps in Red Cat’s Statements

The Red Cat Class Action Lawsuit started after a string of shocking revelations between 2023 and 2025. These disclosures showed big gaps between what Red Cat told the public and what was true.

July 2023: Factory capacity far below claims

Red Cat dropped a bombshell during their July 11, 2023 earnings call. The company’s leaders admitted they could only make “100 drones per month” at their Salt Lake City facility. This was nowhere near their repeated claims of making “thousands of drones per month.”

The news hit the market hard. Red Cat’s stock fell 8.93% the next day as investors tried to process this huge gap. The company also admitted they hadn’t finished building the facility. They needed “years of additional capital investment” to reach their promised production numbers.

September 2024: Retooling halts Teal 2 production

The next hit came on September 24, 2024. Red Cat announced they had to stop making their Teal 2 military drone completely. The company said they needed to “retool” their manufacturing operations. This sudden stop raised red flags about their ability to deliver on military contracts.

Investors reacted quickly. The stock crashed by 25.32% with unusually high trading. People who bought shares based on the company’s production promises lost a lot of money as the price kept falling.

January 2025: Kerrisdale exposes contract value

The final blow landed on January 15, 2025. Kerrisdale Capital released a detailed report that looked at Red Cat’s Army contract claims. U.S. Army budget papers showed the SRR Program was worth about $20-25 million. This was just a tiny piece of the “hundreds of millions” to “over a billion dollars” Red Cat had told investors.

Kerrisdale’s report showed more problems. The U.S. Army’s total drone budget was only $100 million per year. This made Red Cat’s contract claims impossible. The report also revealed that Red Cat was just one of six vendors trying to get the SRR Program – not the exclusive contractor they seemed to be.

The market took another hit. Red Cat’s stock dropped another 21.54% after Kerrisdale’s report came out. This third major disclosure completed what the Red Cat Class Action Lawsuit now claims was securities fraud.

Stock Price Plunges After Each Revelation

The market reacted harshly to each revelation about Red Cat’s operations. The company’s stock faced steep declines as investors started questioning the drone manufacturer’s real value.

How did the market react to each disclosure?

The first blow came at the time Red Cat released its fiscal year 2023 results on July 27, 2023. The stock dropped 8.9% in one trading day and closed at $1.02 per share. Investors were shocked to learn that the Salt Lake City facility could only make 100 drones monthly, not the “thousands” the company had claimed earlier.

The situation got worse after Red Cat’s September 23, 2024 announcement about factory retooling. The company missed consensus estimates by $0.09 per share and reported revenue of just $2.80 million – $1.07 million below expectations. The stock crashed 25.3% over two trading days and settled at $2.36 per share. The missed financial targets and production delays clearly rattled investors.

Kerrisdale Capital’s January 16, 2025 report delivered another heavy blow. The report questioned the SRR contract’s value, and Red Cat’s shares fell 21.5% over two trading sessions to close at $8.56. This was the third major correction in 18 months as investors rushed to sell the stock.

What was the cumulative impact on investor value?

These three major corrections devastated shareholders. Yes, it is clear that each disclosure steadily eroded investor confidence and company value. Red Cat did show impressive performance sometimes, with a 470% return in one 12-month period. However, these gains quickly vanished once operational issues came to light.

The pattern of massive single and multi-day drops after each disclosure are the foundations of the Red Cat Class Action Lawsuit. The stock’s wild swings from huge gains to catastrophic losses have made many investors doubt management’s honesty about the company’s capabilities and contracts to the point they have smacked them with the Red Cat Class Action Lawsuit.

Investors Urged to Join Red Cat Lawsuit

Law firms are looking for investors to join the Red Cat Class Action Lawsuit. Shareholders affected by alleged securities fraud can recover their losses. The case has been filed in the United States District Court for the District of New Jersey. Investors need to understand if they qualify and how they can participate.

Who qualifies to join the class action?

The lawsuit represents people who bought or acquired Red Cat Holdings, Inc. (NASDAQ: RCAT) securities between March 18, 2022, and January 15, 2025 (the “Class Period”). This period includes all three major disclosures that showed gaps between the company’s statements and reality. Anyone who bought Red Cat stock during this time and lost money can join the class action, whether they still own the shares or not. You don’t need to be a lead plaintiff to get your share of any future recovery.

What is the deadline to file?

Investors must file lead plaintiff motions with the court by July 22, 2025. This date matters most for those who want to be lead plaintiff – usually the investor with the biggest financial stake who will guide the lawsuit for other class members. Other investors can still join as class members even after this deadline, but they’ll have less say in how the case moves forward.

How can investors participate?

You’ll need to contact one of the law firms handling the case. If you lost a lot of money and want to be lead plaintiff, or just have questions about your rights as a shareholder, attorney Timothy L. Miles at the Law Offices of Timothy L. Miles can help. You can call him at 855/846-6529 or email tmiles@timmileslaw.com at no cost. Most securities litigation firms like the Law Offices of Timothy L. Miles work on contingency fees, so there’s no upfront cost. They only get paid if they win damages for class members. Make sure you have records of your Red Cat transactions during the class period when you contact these firms.

Conclusion: Final Takeaways in the Red Cat Lawsuit

The Red Cat class action lawsuit is a big legal battle between investors who say they were misled and a drone manufacturer. The company allegedly made false claims about its capabilities. We got into how Red Cat overstated its Salt Lake City facility’s production capacity and the value of its military contract. The company claimed it could make “thousands of drones per month,” but the facility could only produce 100 units monthly. They also said they had a contract worth “hundreds of millions,” but Kerrisdale Capital’s investigation showed it was worth only $20-25 million.

These revelations led to three major drops in stock price. The stock fell 8.93% in July 2023, 25.32% in September 2024, and 21.54% in January 2025. This wiped out much of the shareholders’ value. Without doubt, these dramatic price drops are the foundations of the securities fraud allegations that multiple law firms are now pursuing for affected investors.

Time is running out for shareholders who bought Red Cat securities between March 18, 2022, and January 15, 2025. The final deadline to file lead plaintiff motions with the court is July 22, 2025. Affected investors need to act quickly to protect their legal rights. If you lost money and want to serve as lead plaintiff of the Red Cat class action lawsuit, or have questions about your shareholder rights, attorney Timothy L. Miles of the Law Offices of Timothy L. Miles can help. You can reach him at no cost by calling 855/846-6529 or emailing tmiles@timmileslaw.com.

This case shows everything about corporate transparency in public markets. While the allegations against Red Cat aren’t proven yet, this situation reminds us that gaps between what companies say and what they actually do can have serious financial and legal risks for everyone involved.

Frequently Asked Questions About the Red Cat Lawsuit

Q1. What is the Red Cat class action lawsuit about? The lawsuit alleges that Red Cat Holdings misled investors by overstating its drone production capacity and the value of a military contract. Investors who purchased Red Cat securities between March 18, 2022, and January 15, 2025, and suffered losses are seeking to recover damages.

Q2. How did Red Cat allegedly misrepresent its capabilities? Red Cat claimed its Salt Lake City facility could produce thousands of drones per month, but later revealed it could only produce 100. The company also suggested its military contract was worth hundreds of millions of dollars, when it was actually valued at approximately $20-25 million.

Q3. What were the consequences of these revelations for Red Cat’s stock price? The stock price plummeted after each disclosure: 8.93% in July 2023, 25.32% in September 2024, and 21.54% in January 2025, resulting in significant losses for investors.

Q4. Who is eligible to participate in the Red Cat class action lawsuit? Investors who purchased or acquired Red Cat Holdings, Inc. (NASDAQ: RCAT) securities between March 18, 2022, and January 15, 2025, and suffered financial losses may be eligible to join the class action.

Q5. What is the deadline for investors to file a lead plaintiff motion? The deadline for affected investors to file lead plaintiff motions with the court is July 22, 2025. However, investors can still participate as class members even if they miss this deadline or choose not to pursue lead plaintiff status.