Shares of drone technology company Red Cat Holdings Inc. failed to participate in a broader market rally on Wednesday. While the Dow Jones Industrial Average climbed 1.1% following a Federal Reserve interest rate cut, Red Cat’s stock declined 2.67%, closing the session at $8.38. A notable technical indicator emerged alongside this price action: the cost to borrow shares for short selling, known as the short borrow fee rate, increased by 0.80 percentage points to reach 4.53%. This represented one of the most significant single-day rises among liquid equities with listed options.
Rising Short Interest and Internal Shifts
An increase in the fee rate to short a stock typically signals heightened demand from bearish investors seeking to bet against it or a tightening supply of shares available to borrow. Both scenarios can create additional downward pressure on the share price. The timing of this development is particularly striking as it coincides with a period of active corporate communication. The company’s management presented at the H.C. Wainwright AeroNext Virtual Conference on December 10.
Concurrently, Red Cat is undergoing a restructuring of its executive team. A leadership change announced in early December saw Christian Ericson transition from the role of Chief Financial Officer to Chief Operating Officer. His former position has been filled by Christian Morrison, who has taken over as the new CFO.
Should investors sell immediately? Or is it worth buying Red Cat?
Staggering Growth Metrics Fail to Lift Sentiment
The company’s operational performance tells a contrasting story. For its fiscal third quarter ending September 30, 2025, Red Cat reported a staggering 646% year-over-year surge in revenue. Looking ahead, management has forecast an even more dramatic increase of 1,455% for the current fourth quarter. This robust growth outlook was underscored on December 6, when Northland Securities reaffirmed its “Buy” recommendation on the stock.
Despite these explosive growth figures, the shares have shown recent weakness. The disconnect between fundamental performance and market price action remains unresolved. Market participants will be watching the trading session on December 12 for clarity on whether the recent moves constitute a temporary consolidation or the start of a more pronounced corrective phase.
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