KNDS, the Franco-German tank manufacturer, has postponed its initial public offering (IPO) which was originally slated for a summer 2026 launch. This decision comes as the European defense market shows signs of cooling, with the Stoxx aerospace and defense index dropping a fifth from its January highs. Major defense player Rheinmetall also missed its first-quarter earnings estimates, contributing to the challenging market conditions.
The initial target valuation of KNDS for the IPO was up to €20 billion, but this has since been revised downwards to between €12 billion and €15 billion due to investor skepticism. Even at this reduced valuation, analysts, such as those from the Financial Times, consider a €20 billion valuation to be stretched, requiring a 25x multiple on operating profit to match Rheinmetall's growth, which itself trades at 20x. The market is also increasingly favoring agile technology like drones over traditional tanks, further complicating KNDS's market entry.
Governance concerns related to the ownership structure have also played a role in the IPO's struggles. Following the listing, the French state (via Giat Industries) and the German state (via KfW) are each expected to hold 40% stakes, leaving only 20% as free float for public investors. This 20% free float, combined with a reported 10-year lock-up period for the state holders, has made investors wary of buying a minority position in a company largely controlled by two governments. Despite strong fundamentals, including €4.4 billion in revenue for 2025 (a 16% year-over-year jump), €661 million in operating profit, and a record €33.1 billion order backlog, these structural issues and market headwinds have led to the postponement.
