Why Red Cat Stock Popped Today

Red Cat Holdings (NASDAQ: RCAT) banal jumped 4.7% retired of the gross this greeting earlier rapidly giving backmost overmuch of its gains. As of 9:45 a.m. ET, the shaper of subject drones is inactive up 1.5%, however.

But does it merit to be?

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Red Cat's electrifying quality

Red Cat catalyzed aboriginal enthusiasm with a property release, announcing it has acquired Quaze, a "Québec-based developer of wireless powerfulness transportation exertion for unmanned systems, drones and autonomous machines." Red Cat did not disclose its acquisition terms successful the property release, but did disclose it successful an 8-K filing with the SEC.

Husbanding its cash, Red Cat structured the acquisition arsenic an all-stock transaction, paying 1.9 cardinal shares worthy astir $21 cardinal to get its caller subsidiary. If Quaze hits definite fiscal targets post-acquisition, Red Cat volition beryllium a further $5 cardinal astatine a aboriginal day (also payable successful stock).

Is this bully quality for Red Cat?

Knowing the acquisition terms ($26 million) is portion of the equation, but to truly cognize if this is simply a bully woody for Red Cat, we request to cognize however overmuch gross Quaze was generating -- and whether that gross is profitable.

Red Cat didn't reply either of those questions successful its SEC filing, however. What we bash cognize is that the $26 cardinal acquisition price, if paid successful shares, volition dilute existing Red Cat shareholders by astir 1.6% -- not a break-the-bank price, but not insignificant.

What volition Red Cat get for this sum?

Basically, the quality to wirelessly complaint drones wherever humans aren't astir to plug them successful -- for example, charging aerial drones from the decks of oversea drones. It's an important capableness to beryllium sure.

We conscionable don't cognize yet whether it volition wage disconnected financially for Red Cat.

Should you bargain banal successful Red Cat close now?

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