Australian laser maker EOS has raised serious concerns regarding a report published by U.S. short seller Grizzly Research, which it claims may have been unlawful. The contentious report, released last Friday, took aim at an $80 million contract between EOS and an undisclosed South Korean customer, labeling it “intentionally misleading and utterly unrealistic.” Following the publication of the report, EOS experienced a steep decline in its share price, plummeting by 16% in one day. This significant drop prompted the company to halt trading of its stock.
In a statement made on Tuesday, EOS described the allegations put forth by Grizzly Research as “misleading, manipulative and pejorative.” The company is currently reviewing whether the report breaches corporate laws in both Australia and Germany, where the company is also publicly traded. EOS has engaged legal counsel in both countries to explore available actions.
Despite the initial shock from the report, EOS’s shares made a notable recovery, closing 11.8% higher on Tuesday. This rebound effectively reversed most of the 15.8% loss the company faced following the report’s release. Analysts suggest that this resurgence may reflect a reassessment by investors who are giving management the benefit of the doubt, rather than a classic short squeeze. Billy Leung, an investment strategist at Global X ETFs Australia, noted that the market’s reaction seems to align more with a reassessment of the claims presented in Grizzly’s report.
EOS also highlighted that Grizzly Research has disclosed holding a short position in the company’s securities, suggesting that the short seller stood to gain from a decline in EOS’s share price. The introduction of the contract announcement in December 2022 had previously bolstered EOS’s shares by 19%, indicating the volatility surrounding the company’s news events.
The broader context of the global defense industry is marked by strong growth amid rising geopolitical tensions, which EOS indicated has positively impacted its operations. The company reported improvements in its balance sheet and order intake following a turnaround initiative initiated in 2022. Moreover, earlier reports have hinted that EOS is contemplating moving its headquarters and stock market listing from Australia to Europe within the next year, underscoring its strategic positioning in an evolving market climate.
