What happened

Shares of AgEagle Aerial Systems (UAVS -4.09%) fell 17.1% in February, according to data provided by S&P Global Market Intelligence, weighed down by a short-seller report that raised questions about the business. The stock was actually up more than 50% for the month prior to the report, but fell dramatically in the days after.

So what

AgEagle, a drone manufacturer focused primarily on agriculture, has had a meteoric rise over the past year. Just 12 months ago it was a penny stock, valued by the market at less than $10 million. But that all changed last summer when investors bought in to talk that the company could be working with Amazon on a retail delivery drone.

UAVS Chart

UAVS data by YCharts

To date, there is no formal confirmation of any sort of a relationship with Amazon or any other retailer, and Bonitas Research in a report issued Feb. 18 called into question a lot of the narrative that has fueled the rally. Bonitas said the Amazon rumor was sparked by a promotional video first uploaded by the daughter of AgEagle's founder and former chairman, and noted Amazon in late 2020 told the Wichita Business Journal that the company has no dealings with AgEagle.

Bonitas called AgEagle "a pump & dump scheme" designed "to defraud U.S. investors."

AgEagle fired back the next day, saying the report "contains multiple baseless claims" and explaining it is contractually obligated not to disclose the name of the "major e-commerce client" it is working with.

A drone hovers over a field.

Image source: Getty Images.

Now what

Even after the declines AgEagle shares are still up more than 1,700% over the past year. The market values AgEagle at nearly $500 million, a lofty number for a company that generated just $1.35 million in revenue over the past 12 months.

I have no idea if Bonitas is correct in its allegations. But even if Amazon or another e-commerce client is waiting in the wings, AgEagle's shares look fully valued. This is a stock that appears to have gotten ahead of the underlying business even without the drama of fraud accusations. Whatever is going on at AgEagle, I'd advise investors watch from the sidelines.