Electro Optic Systems flags potential legal breaches over Grizzly short report; shares end higher

Feb 10 (Reuters) – Australian laser maker Electro Optic Systems said on Tuesday it was concerned U.S. short seller Grizzly Research may have acted unlawfully by publishing a report on the company last week that triggered a sharp fall in its share price.

On Friday, Grizzly Research released a report that called EOS’s $80 million contract with an unnamed South Korean customer “intentionally misleading and utterly unrealistic”. EOS shares fell 16% that day, with the company having to place the stock on a trading halt.

In its disclosure on Tuesday, EOS described the allegations in the report as “misleading, manipulative and pejorative”.

It added it was reviewing whether the report breached corporations laws in Australia and Germany, where its shares also trade, and has instructed legal advisers in both countries to consider available remedies.

The company said Grizzly, which disclosed it holds a short position in the company’s securities, stood to benefit from a decline in its share price. The Australian firm’s announcement of the contract on December 15 had helped lift its shares 19% at the time.

Grizzly Research did not immediately respond to a Reuters request for comment.

EOS’s shares closed 11.8% higher on Tuesday, reversing course after the disclosure to erase most of its 15.8% loss.

The global defense industry is experiencing strong growth amid heightened geopolitical tensions, EOS said, adding that it has strengthened its balance sheet and increased order intake in recent months following a turnaround effort launched in 2022.

Earlier this year, Reuters reported exclusively that the firm was “very likely” to shift its headquarters and stock market listing from Australia to Europe within a year.

(Reporting by Roshan Thomas in Bengaluru; Editing by Janane Venkatraman)