Electro Optic Systems Holdings Ltd (ASX: EOS) shares dropped another 7.81% at the close of the ASX on Thursday afternoon, to $6.14 a piece.
The latest decline means the shares have now crashed 44.28% from their all-time high of $11.02 per share recorded in mid-January.
But it's not all bad news, thanks to some price surges in 2025, the shares are still 365.15% higher than the trading price this time last year.
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What happened to EOS shares this year?
The Aussie defence company, which develops and produces advanced electro-optic technologies, faced a couple of headwinds this month.
The ASX stock benefited from surging demand for exposure to the defence sector amid ongoing geopolitical volatility throughout 2025. And it's a trend which continues to translate, or potentially exacerbate, in 2026 so far. The company has had several major contract wins recently.
But its share price has fallen sharply since late January, now dropping over 44% over the past month alone.
It looks like investors locked in their gains late last month, and then the sell-off continued into February after speculation that the company might move its headquarters and stock market listing from Australia to Europe to capitalise on rapidly rising defence spending across the region.
This was shortly followed by a scathing short seller report from Grizzly Research which said that it finds "statements that EOS made in the investor call dedicated to the new Korean contract announcements aggressively misleading, and sometimes bordering on outright lies".
The report also raised doubts over a recent acquisition.
It said:
Our research in the acquisition of MARSS by EOS in January 2026 uncovers a multitude of issues. We believe management has lied about past revenues and is misrepresenting the economic opportunity of this acquisition.
The following week, the US-based short seller disclosed that it holds a short position in EOS shares, meaning it stands to benefit financially if the share price falls.
In response, EOS requested a trading halt and released a detailed statement. It said it rejects what it describes as the report's "misleading, manipulatory and pejorative" conclusions. The company also revealed it has instructed legal advisers in Australia and Germany to consider potential legal action.
But the damage to investor confidence has already been made.
But analysts are still bullish
Investor confidence may have been slashed this month, but analyst sentiment remains bullish on the outlook for EOS shares.
TradingView data shows a consensus strong buy rating on EOS shares, and a maximum target price of $12.72. That implies a potential 107.17% upside at the time of writing.
