We’re quick shares of Crimson Cat Holdings, a $1 billion drone producer that’s added greater than $900 million in market capitalization during the last 9 months principally in anticipation of an award for the manufacturing of the US Military’s quick vary reconnaissance (SRR) drone and the supposedly large market alternative unlocked by such a high-profile endorsement.
However expectations for each the SRR contract measurement and the potential for follow-on gross sales bear nearly no
relationship to actuality.
Military finances paperwork clearly delineate an SRR finances for 2025 of slightly below $25 million, and an expectation of about the identical within the medium time period. The Military additionally intends to refresh the SRR mannequin each 2-3 years whereas remaining open to switching contractors. That contrasts sharply with Crimson Cat administration’s artful portrayal of a sole-source contract value near $400 million over 5 years, and $80 million in 2025. Buyers must also think about that Crimson Cat preemptively introduced this system win with out the Military’s permission, weakening its place in contract negotiations and even, in a worst-case situation, endangering the award.
Crimson Cat’s depiction of an enormous follow-on market consisting of the opposite US army providers, US authorities businesses, and US-allied militaries can also be a fantasy. The Air Pressure has little infantry and thus little use for an infantry drone, and the Marines and Coast Guard have preexisting drone applications. The one different related authorities company is Customs and Border Patrol, and its finances paperwork point out close to time period drone procurement of simply $1 million. In the meantime, administration has been speaking about large imminent drone gross sales to NATO allies for the final 3 years with nothing to indicate for it, which could possibly be as a result of European militaries are extra inclined to switch cheaper and higher Chinese language drones or as a result of there’s an array of smaller homegrown European drone suppliers already supplying these clients.
Similar to these elusive NATO contracts, Crimson Cat has been setting near-term deadlines for a “mass manufacturing” facility since 2022, however having devoted nearly no capex to 1, nonetheless can’t manufacture giant portions of drones. 2025 steering, although, assumes that Crimson Cat will produce 3 new drone fashions, every at triple the velocity of the corporate’s historic greatest vendor.
A kind of new drones, the Edge 130, involves Crimson Cat by a 2024 acquisition and has by no means been produced as greater than a prototype.
Crimson Cat’s declarations and projections hardly ever materialize, and we imagine the identical shall be true of each the corporate’s 2025 steering and the parameters of the SRR contract. Nearly instantly following the SRR win, two key executives – together with George Matus, the brains behind the SRR-winning drone – resigned and bought most of their inventory. Share gross sales have additionally been made by different insiders. Having set nearly inconceivable expectations, Crimson Cat is about to be blown out of the sky.
Learn the total Kerrisdale Capital report.
Associated
Uncover extra from sUAS Information
Subscribe to get the most recent posts despatched to your e mail.
