Electro Optic Systems, the Australian maker of laser systems, said on Tuesday it is investigating whether a recent report by U.S. short seller Grizzly Research breached legal requirements after the publication coincided with a notable fall in its stock.
Grizzly released a report on Friday that characterized EOS’s $80 million contract with an unnamed South Korean customer as "intentionally misleading and utterly unrealistic". The day the report appeared, EOS shares dropped 16% and trading in the stock was paused under a trading halt.
In a disclosure issued on Tuesday, EOS labeled the allegations in the report as "misleading, manipulative and pejorative" and said it had asked legal advisers to evaluate whether the report contravened corporations laws in Australia and Germany, where its shares are also listed. The company said it had instructed legal counsel in both jurisdictions to consider available remedies.
EOS highlighted that Grizzly had disclosed holding a short position in the company’s securities, noting the firm would benefit from a decline in EOS’s share price. EOS also pointed out that its announcement of the contract on December 15 had previously lifted its shares by 19% at that time.
Market moves reversed on Tuesday after EOS’s disclosure. The stock closed 11.8% higher, largely offsetting an earlier 15.8% loss recorded after the short seller’s report.
Separately, EOS said the global defense industry is experiencing robust growth amid heightened geopolitical tensions. The company added that it has strengthened its balance sheet and increased order intake in recent months as part of a turnaround program launched in 2022.
Earlier this year it was reported exclusively that the firm was "very likely" to shift its headquarters and stock market listing from Australia to Europe within a year. EOS did not comment on that specific report in the disclosure described above.
Context and market relevance
The episode underscores the market sensitivity of defense contractors to public allegations and the potential for short seller reports to move share prices materially in a short period. EOS’s public response centers on legal review and rebuttal of the report’s characterizations, while the company points to improving financial metrics and order flow as evidence of operational momentum following its 2022 turnaround efforts.