Why Red Cat Stock Crashed Today

Up 66% implicit the past year, Red Cat Holdings (NASDAQ: RCAT) banal gave backmost overmuch of its gains this morning, falling 15.2% done 11:50 a.m. ET aft announcing plans to contented and merchantability 23.9 cardinal caller shares of banal successful an effort to rise $225 cardinal (before fees).

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Red Cat needs currency

Two months ago, conscionable aft Red Cat's astir caller "earnings" study (the punctuation marks are due to the fact that Red Cat didn't really "earn" anything, but mislaid $0.17 per share), I posed the question: "At what constituent accumulation standard volition let Red Cat to pivot from losing money... to earning profit"?

Red Cat's reply contiguous appears to be: Not soon.

Addressing its determination to merchantability 23.9 cardinal shares astatine conscionable $9.40 per stock -- a 15% discount to yesterday's closing terms -- Red Cat explained it needs the wealth "for wide firm purposes and continued acceleration of strategical maturation initiatives, including, but not constricted to, acquisitions oregon concern expansion, probe and development, superior expenditures, and moving capital."

While it mightiness beryllium bully to spot immoderate consolidation successful the drones sector, with Red Cat snapping up competitors astatine charismatic prices, I fishy astir of the wealth volition spell to the "general firm purposes" portion of that mentation -- wealth Red Cat needs simply to support the doors unfastened and the lights on.

How agelong tin Red Cat bent successful there?

Why bash I accidental this? According to S&P Global Market Intelligence data, Red Cat has ne'er generated affirmative escaped currency travel connected its own. Instead, it's burned progressively ample piles of cash, and much than $118 cardinal implicit the past 12 months.

Without this caller currency infusion, Red Cat was connected people to beryllium retired of currency wrong a year. With the cash, it tin astir apt support purring done 2027.

Should you bargain banal successful Red Cat close now?

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