EOS (ASX: EOS) Crashes 46% From All-Time High After Short Seller Attack- Buying Opportunity or Time to Run?

Electro Optic Systems (ASX: EOS) has been placed in a trading halt at A$6.00 after falling roughly 33 per cent in the past week. The stock hit an all-time high of A$11.20 on 13 January, meaning it has now lost nearly half its value from that peak. The trigger is a report from US-based short seller Grizzly Research, which makes serious allegations about two key announcements: a US$80 million Korean laser contract and the acquisition of European defence tech firm MARSS Group. EOS will remain halted until it releases a formal response or until the market reopens on Tuesday, 10 February. What management says next could define this stock’s direction for months.

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Why the Short Seller’s Claims Are Hard to Ignore

The biggest concern centres on EOS’s US$80 million Korean laser contract, announced on 15 December 2025, which drove the stock up roughly 100 per cent in three weeks. Grizzly claims to have identified the unnamed Korean buyer as Goldrone Co., Ltd, a tiny agricultural drone company worth just US$5.2 million. According to the report, Goldrone was trying to raise approximately US$343,000 through a share issue to finance the deal, raising obvious questions about whether it can realistically back a US$80 million commitment.

EOS itself acknowledged in its Q4 2025 update that the customer needed “further work to finalise the arrangements,” pushing the expected deposit into February or March 2026. In our view, that delay combined with the size mismatch is a legitimate red flag that demands a clear explanation.

Grizzly also targets the January 2026 acquisition of MARSS Group, a deal valued at up to A$228 million (A$54 million upfront in cash), alleging that EOS’s CFO overstated the company’s historical revenue during an investor call. UK filings for MARSS reportedly show substantially lower figures than the “€240 million over five years” that was quoted. On top of all this, EOS sold its only consistently profitable division, EM Solutions, in January 2025 for A$158.6 million. While this provided a vital cash injection to clear debt, the remaining core defence business is still loss-making. That combination of questions around revenue claims, contract credibility, and underlying profitability is what spooked the market.

Why Some Investors Are Still Backing EOS

Despite the severity of these allegations, the defence business underneath has real substance. EOS reported a verified, unconditional contract backlog of A$459 million at the end of December 2025, up from A$136 million a year prior. Notably, this figure excludes the contested A$120 million Korean contract; if included, the total reaches A$579 million. That backlog includes verified deals with the Australian Army and the US Army, and the company holds around A$100 million in cash with no debt.

Broker support has not vanished either. Bell Potter maintains a buy rating with a target of A$8.66, while Ord Minnett targets A$12.72. Grizzly is a short seller; they profit when the stock falls, so their report carries a deliberately bearish lens. That does not mean their claims are wrong, but investors should weigh them accordingly. The broader counter-drone market remains one of the fastest-growing segments in global defence, forecast to reach US$15-20 billion by 2030, and EOS is well positioned within it.

The Investor’s Takeaway for EOS

We believe this is a clear wait-and-see situation. If EOS can explain the Korean contract counterparty convincingly and back up the MARSS revenue figures with hard evidence, confidence could recover quickly. If the response is vague or defensive, further selling is likely once trading resumes.

At A$6.00, this stock is still roughly five times higher than where it started in 2025. It is not cheap, and it is not a proven bargain. For holders, wait for the response before acting. For those on the sidelines, patience is the smartest move right now. The next 48 to 72 hours will tell us whether EOS’s growth story holds together or whether the market was too eager to look the other way.