Australian Defense Contractor Faces Scrutiny After Short-Seller Report
06.02.2026 - 05:51:04
Shares of Electro Optic Systems (EOS) were suspended from trading on the Australian Securities Exchange (ASX) following a dramatic sell-off triggered by a critical report from short-selling firm Grizzly Research. The stock plummeted more than 16% to AUD 6.00 before the company requested an immediate trading halt.
The focal point of Grizzly Research's allegations is an USD 80 million (approximately AUD 120 million) contract announced by EOS in mid-December 2025. The company had reported the sale of high-energy laser systems to a South Korean client, a deal that was widely seen as a key driver behind a nearly 30% rally in the share price.
The short-seller's report casts serious doubt on the credibility of this agreement. It identifies the counterparty as "Goldrone Co. Ltd.", which it describes not as a major defense entity but as a small agricultural drone supplier. According to Grizzly's findings, Goldrone employs just three staff, recorded peak revenue of only USD 476,000 in 2018, and allegedly operates from a restaurant complex. The analysis questions the firm's capacity to fulfill a contract of such magnitude.
Should investors sell immediately? Or is it worth buying EOS?
Management's Credibility Under Fire
Grizzly Research has labeled management's initial characterization of the Korean deal as "aggressively misleading." The accusations arrive at a sensitive time for EOS, potentially jeopardizing the stock's recent gains.
The report also raises questions regarding EOS's acquisition of MARSS in January 2026 and references past regulatory issues. The Australian Securities and Investments Commission (ASIC) fined the defense contractor in November 2025 for prior breaches of continuous disclosure obligations.
Trading Halt and Next Steps
The enacted trading freeze has temporarily prevented further declines. Under ASX regulations, the halt will remain until company management releases a clarifying statement or normal trading resumes on the next business day, expected early next week. Investors and market participants are now awaiting concrete evidence that EOS conducted appropriate due diligence on Goldrone and that the USD 80 million contract is financially secure.
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