Shoals Technologies Group, Inc. (Nasdaq: SHLS) answered an activist short report with two pieces of news before the open on November 4, 2026: third-quarter revenue up 43.8% to $195.3 million, and an all-stock merger with ARRAY Technologies, Inc. (Nasdaq: ARRY). Pelican Way Research went public with its short on October 28, questioning two partnership deals and the legacy solar wiring business. The quarter undercut parts of that case, but margins are still well below last year and the merger changes what a Shoals share is.
This is journalism and commentary, not investment advice. We hold no position unless stated.
Key facts
- Price: $7.56 at the October 28 close, the day of the short report; $8.47 at the November 3 close, the last close before the news. 52-week range $5.43 to $13.18.
- Q3 2026: revenue $195.3 million (+43.8%), against guidance of $150 million to $170 million; gross margin 31.9% versus 37.0% a year earlier; net income $17.9 million.
- Inventory: $148.3 million at September 30, down from $184.7 million at June 30 but still above $89.9 million at year-end 2025.
- Debt: the revolver fell to $163.75 million from $196.75 million at June 30; cash was $7.7 million.
- Backlog and awarded orders: $791.7 million, up 9.8% from a year earlier but down 1.2% from June 30.
- Guidance raised: 2026 revenue of $665 million to $685 million, up from $600 million to $640 million.
- The merger: each Shoals share converts into 1.6931 ARRAY shares; Shoals holders would own about 65% of the combined company. Closing is expected in the first quarter of 2027.
What did the merger announcement say?
ARRAY, a solar tracker maker, is the legal acquirer, but Shoals chief executive Brandon Moss would run the combined company, per the joint release. The companies project more than $100 million of annual adjusted EBITDA synergies within three years and an indicative 2027 adjusted EBITDA of $410 million to $480 million, including first-year synergies.
The deal needs votes from both sets of shareholders and regulatory approvals. Brad Forth chairs both boards and did not take part in either board's vote.
By our math, 1.6931 ARRAY shares were worth about $7.86 at ARRAY's $4.64 close on November 3, about 7% below Shoals' own close. ARRAY rose about 22% and Shoals about 11% that day, before any announcement.
Why are short sellers bearish on Shoals?
- Partner deals. Pelican questions a 2025 MOU with UGT Renewables and Sun Africa, citing governance problems and litigation at the partner.
- Data center pivot. Pelican says TerraFlow Energy, a flow battery maker that signed an MOU with Shoals in August targeting up to 5 GW a year, has raised only about $20.4 million, per third-party data.
- Share loss. Pelican says one customer cut its use of Shoals from 65% to 15% and expects rivals such as Nextracker to take more share.
Neither November 4 release mentioned UGT or TerraFlow.
Who's making this call and why?
Pelican Way Research describes itself as an activist investment firm. Its thread opens: "We short $SHLS because of serious problems we have found with some of the deals they have announced to shore up their legacy business, which has recently experienced significant margin compression." Pelican profits if the shares fall. It had not posted about the results or the merger on X as of our check on November 4.
Track record. Pelican Way is not yet scored in our tracking. Wolfpack Research, which ranks 1st on our career scoreboard at 11-4 on 15 scored calls, reposted the thread on October 28. A repost is not a Wolfpack call. See the scoreboard.
Other supporters: a lawyer who supports short activists wrote: "Pelican out with a solid report on $SHLS, but I want to highlight the disclaimer."
Who disagrees?
- The MOUs may not matter. A small account replied that analysts do not model UGT or TerraFlow revenue, adding: "Finding one customer check who is taking share lower isn't deep diligence."
- The quarter beat. Moss said productivity gains drove revenue and adjusted EBITDA above the expected range, per the Q3 release. Investing.com put the consensus revenue estimate at $162.2 million.
- Cash came back. By our math, operating cash flow was about $28.8 million positive in the third quarter, after negative $34.6 million in the first half. Shoals now guides to $55 million to $65 million for the full year.
- Big holders. BlackRock reported a 6.6% stake in a 13G filed October 27, and First Trust a 5.87% stake in a 13G filed October 30.
- Retail bulls. A retail account's Q3 preview cited a patent verdict, the BlackRock stake and margin recovery: "This name is set up."
Is Shoals a good bet right now?
It depends on what you think the combined company is worth. By our math Shoals was worth about $1.43 billion at $8.47 on 168.5 million shares, with about $156 million of net debt. The combined company expects net debt of about $873 million at year-end 2026, about 2.6 times adjusted EBITDA, plus about $349 million of ARRAY preferred stock after a planned partial redemption.
The short case on quality is not settled. Gross margin of 31.9% was up from 30.3% in the second quarter but still about 5 points below a year ago, and Shoals again cited rework and quality costs.
What would prove it right or wrong?
Right for the short: the merger stalls or fails a shareholder vote, margins slip back toward 30%, cash flow misses the $55 million to $65 million range, or the MOU partners fail to deliver.
Wrong for the short: the deal closes on schedule, inventory keeps falling, gross margin keeps recovering toward last year's 37.0%, and backlog grows again from $791.7 million.
This is journalism and commentary, not investment advice. We hold no position unless stated.
