Australian Defense Firm Fires Back at Short Seller Allegations

Shares in Electro Optic Systems (EOS) rallied sharply after the Australian defense contractor issued a forceful rebuttal to a critical report from short seller Grizzly Research. The company's detailed response, which labeled the analysis as misleading, appears to have reassured investors following a period of significant stock volatility and a temporary trading halt.

In an official statement, EOS dismissed the February 6th report from Grizzly Research as manipulative. The firm, which profits from declining share prices, had raised questions about EOS's accounting practices and specific contract details. The market's initial reaction to the defense was positive, with the stock advancing more than 7% after the clarification was released, recovering from a steep earlier decline.

To directly address concerns over its financial health, EOS disclosed current liquidity metrics. The company reported holding $107 million in cash at the end of the 2025 fiscal year, with no drawn debt. Furthermore, an undrawn credit facility of $100 million remains available. EOS management also announced it is examining all legal options against Grizzly Research in both Australia and Germany.

Scrutiny Centers on Key Contracts

A primary focus of the short seller's critique was an $80 million conditional contract for high-energy laser weapon systems in South Korea. EOS clarified that the conditional nature of this agreement has always been communicated transparently to the market. Notably for investors, this potential deal is not included in the firm's secured order backlog, which stands at $459 million. Fulfillment of the contract conditions, including the receipt of an $18 million advance payment, is currently underway.

Should investors sell immediately? Or is it worth buying EOS?

The company also refuted allegations related to its acquisition of the European software firm MARSS. EOS stated that its internal due diligence process revealed historically higher revenue figures for MARSS than those presented in Grizzly Research's analysis.

The substantial share price recovery suggests investors are tentatively accepting the company's arguments. However, the ultimate resolution of the conditional South Korean contract is likely to be crucial for sustaining long-term market confidence.

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