KNDS, the Franco-German defense company known for its Leopard 2 and Leclerc tanks, is encountering substantial challenges in attracting investors for its planned initial public offering (IPO). Despite initially targeting a valuation of over €20 billion, this has been cut to roughly €15 billion due to pushback from institutional buyers. Investors are particularly concerned about the governance structure, which will see the French state (via GIAT) and the German state (via KfW) each hold 40% of the company, leaving only a 20% free float for public investors. This means 80% of the company will be controlled by two governments.
The IPO arrangement further complicates matters with a proposed 10-year lock-up period for state holders with stakes below 30%, effectively freezing majority ownership for a decade. This structure means public investors would be acquiring a minority position in a company where significant ownership changes are prevented for an extended period. The IPO is a secondary sale of existing share capital, meaning no new shares will be issued, and no fresh capital will flow into KNDS itself. This is another point of contention for investors looking for growth opportunities.
Despite these investor concerns, KNDS's fundamentals are strong. The company reported €4.4 billion in revenue for fiscal year 2025, a 16% year-over-year increase, along with €661 million in EBIT and €980 million in free cash flow. It also boasts a record order backlog of €33.1 billion. If the IPO proceeds at a €15 billion valuation, it would imply a price-to-EBIT multiple of approximately 23x, based on the 2025 EBIT figure. The dual listing is planned for Euronext Paris and the Frankfurt Stock Exchange, targeting a mid-July 2026 launch, with about €3 billion worth of shares available for public trading.
