Key Takeaways
- The closely watched IPO of Franco-German defense group KNDS could face hurdles amid political division, analysts say.
- The selloff of ammunition firm CSG following its January debut, and broader weakness in defense stocks, have also raised questions about the outlook for a KNDS IPO.
- According to media reports earlier this year, KNDS was preparing for a dual listing in Frankfurt and Paris as soon as June or July.
One of Europe’s most anticipated defense IPOs in recent years may face headwinds amid political fractures on the continent and weakness in European defense stocks.
KNDS, which produces Leopard 2 tanks and Caesar howitzers, was reportedly preparing for a dual stock market listing in Frankfurt and Paris as soon as June or July. But analysts warn that a decision this month by the German government to pull the plug on plans to build a fighter jet with France “doesn’t look good” for the prospects of KNDS going public.
“The Franco-German relationship and where we will go from here matter, I think, for this IPO,” says Atınç Özkan, equity analyst and head of EMEA Defense & Aerospace, at Wood & Company.
At the same time, the continued correction in European defense stocks this year, following a record run on the continent’s rearmament push, has raised questions about investor demand.
“This overall selloff might have been exaggerated for some names, but if it continues I will not be surprised if KNDS’ IPO will be postponed,” Özkan adds.
The Ownership and Governance Challenges Weighing on a KNDS IPO
KNDS, born out of a 2015 merger of France’s Nexter and Germany’s Krauss-Maffei Wegmann, is owned equally by the French government and several German families. Under the IPO plans, one-fifth of shares are expected to be publicly listed, while the families negotiate a separate sale to the German government, leaving both Paris and Berlin with 40% stakes.
However, the extent of boardroom influence, low liquidity, and a recently resolved auditing issue have been prominent concerns for investors. KNDS CEO Jean-Paul Alary has insisted that getting the “right governance” is critical for the value of its future shareholders, and both France and Germany have indicated they plan to cut their holdings to 30% in the coming years. Nevertheless, analysts have trimmed back their initial valuation from EUR 25 billion to EUR 18 to EUR 20 billion.
KNDS did not respond to Morningstar’s request for comment on the value or timeline of its IPO.
A Fast-Moving Defense IPO Landscape
The listing earlier this year of Czechoslovak Group (CSG), one of Europe’s leading makers of artillery ammunition for NATO members and Ukraine, may give investors a reason to pause. CSG listed amid strong demand in its January debut, but its share price has more than halved since.
Still, Piotr Chodyra, analyst at Trigon Dom Maklerski, says much of that weakness has been company-specific. “Shares have since come under pressure due to governance‑perception issues, including the impact of the Hunterbrook short‑seller report on market sentiment, a business mix still heavily skewed to land systems and ammunition with high Ukraine exposure, and the absence of a strong state anchor shareholder or customer,” he says.
The short-seller report by hedge fund Hunterbrook claims CSG withheld key details of its business in its IPO prospectus, something CSG has denied. For Wood’s Özkan, that has done little to allay wider investor concerns.
“They could have done a better job in terms of addressing all these issues. But I don’t think the CSG IPO is going to necessarily set the tone for KNDS,” he says.
A CSG-KNDS Tie Up?
To complicate matters further, CSG has reportedly sought to take a minority stake in KNDS. According to the Financial Times, KNDS CEO Alary has said that while the IPO remains his priority, he would not rule out future deals. Nevertheless, Chodyra believes it’s unlikely that CSG would succeed in acquiring a meaningful strategic stake.
“Both Paris and Berlin are signaling a preference for balanced French and German state ownership around the IPO, with Germany itself preparing to take a large stake, leaving limited political room for a competing industrial shareholder from a third country. In that context, a sizable CSG stake in KNDS looks more like a low‑probability option to me,” he says.
What investors should focus on is whether KNDS can transform itself into a Rheinmetall.
Atınç Özkan, Wood & Company
Perhaps more important for KNDS will be whether it can avoid some of the other pitfalls that have held back CSG, such as concerns over business diversification. KNDS’ revenue rose 16% to EUR 4.4 billion in the 2025 financial year, while its order backlog increased to EUR 33 billion, largely boosted by German and French orders.
“What investors should focus on is whether KNDS can transform itself into a Rheinmetall,” Özkan says, citing the German defense giant’s diversification across air, naval, land, space and, increasingly, software. Meanwhile, he says that a recent retreat in defense stocks is likely to be short-lived.
“Overall European defense stocks are suffering from market myopia about a potential peace deal in Ukraine. The reality is that the Rubicon has been crossed, the geopolitical paradigm shift is there,” he adds.
