Franco-German tank maker KNDS is facing significant headwinds with its planned summer IPO, as a cooling defense market and investor skepticism complicate its targeted valuation. The Stoxx aerospace and defense index has fallen a fifth from its January highs, and even major defense beneficiaries like Rheinmetall have missed first-quarter estimates, indicating a broader market slowdown.
Analysts suggest that KNDS's proposed €20 billion valuation seems high. To justify this, KNDS would need to achieve an operating profit of €800 million annually, requiring a 25x multiple on earnings. This compares unfavorably to Rheinmetall's current 20x multiple. Investors are increasingly favoring agile technology like drones over traditional heavy armor, making KNDS's reliance on tanks less appealing.
Further adding to the pressure are complex ownership hurdles. The company is jointly owned by the French state and German families, and Berlin's attempt to acquire the German family's shares for strategic security reasons is stalled by price disagreements and political complications. A Czech acquisition bid has also met with political and market resistance, contributing to the uncertainty surrounding the IPO.
