Ondas became the most failed-to-deliver security in the U.S. during the latest Securities and Exchange Commission reporting period, putting the stock at the center of a heated debate over short selling and market manipulation, according to Protos.
A fail to deliver happens when the party responsible for delivering shares to complete a trade does not deliver them. Elevated fail-to-deliver rates often fuel arguments about stock manipulation, especially in cases where short sellers may have sold shares without properly borrowing and delivering them. Protos noted, however, that more routine explanations are far more common.
Ondas led the U.S. in fails to deliver in August
Ondas is a defense drone company partnered with Palantir. Its short interest stands at 40.9% of the float, and Protos said the stock also topped the U.S. fails-to-deliver leaderboard in August.
A year earlier, for comparison, short interest was about one-tenth of the current level, near 4%. Bears betting against the stock are facing off against a committed group of bullish investors who argue the company is on a “generational run” after moving up from penny-stock territory a few years ago to a multi-billion-dollar market capitalization.
On the Monday after the company’s latest quarterly earnings release, 20,954,097 shares of ONDS, its Nasdaq-listed common stock, remained undelivered in the National Securities Clearing Corporation’s Continuous Net Settlement system. No stock in the U.S. posted a higher number of undelivered shares that day.
The figure is public because the SEC publishes all fails-to-deliver data twice a month. In the newest disclosure, which covered the second half of August, Ondas recorded more fails to deliver than any other security in the country.
Short interest stayed high despite stronger revenue figures
Protos described Ondas’ short interest as somewhat unusual given the company’s reported financial results. Ondas posted $83.8 million in second-quarter revenue, more than 13 times its Q2 2025 figure. The company also lifted its full-year revenue target to above $525 million and said it had plenty of government contracts.
Even so, the heavily shorted stock has lost 22% of its value since the start of the year. Over the past 12 months, after rallying 10x from penny-stock territory, the stock has not added any value. Protos cited TradingView data showing that Ondas shares have traded flat over that period.
SEC says fails to deliver are not proof of naked shorting
In rare cases, fails to deliver may stem from short sellers who did not properly borrow stock before selling short, the report said. Still, that does not mean fails to deliver should be read as evidence of naked shorting.
The SEC has warned: “fails-to-deliver are not necessarily the result of short selling, and are not evidence of abusive short selling or ‘naked’ short selling.”
Under market rules, a stock is classified as a Threshold Security if fails to deliver stay above 10,000 shares and 0.5% of shares outstanding for five settlement days. Ondas entered that list on August 18 and remained on it through August 27.