Rheinmetall AG shares plunged as much as 19% after Germany scrapped a major warship contract for six F126 anti-submarine frigates. The project, initially valued at approximately EUR10 billion, was canceled due to significant delays and projected cost increases, which the defense ministry stated would have pushed the bill to over EUR18 billion.
The cancellation is a blow to Rheinmetall, which had recently acquired Naval Vessels Luerssen in March 2026 and was poised to take over as the lead contractor for the F126 program in a EUR12.8 billion deal. The German government decided to abandon the F126 program, having already spent around EUR2.3 billion on it, and plans to write off about EUR2 billion in costs.
Instead of the F126 frigates, Germany will procure eight smaller Meko A-200 class frigates from TKMS. TKMS shares jumped 9.8% on the news, as they already had a contract for four Meko A-200 frigates at about EUR1 billion each and are now set to deliver an additional four, with the first delivery anticipated in 2029. The initial four Meko frigates are estimated to cost EUR6.3 billion, with an option for four more at EUR5.3 billion.
The decision comes amidst broader challenges in European rearmament efforts, including scrapped joint projects and delays, and after mounting concerns among German MPs about the F126's costs and delivery times. Analysts from Citi suggested the news could lead to an approximately EUR115 downside risk to Rheinmetall's share price.
