Tank maker KNDS postpones IPO amid market struggles for defense stocks

Tankmaker KNDS has postponed its highly anticipated public listing until market conditions improve, following a slump in European defense stocks in recent months.

Shareholders of the Amsterdam-based company have decided that the IPO process will resume “upon the return of more favorable market conditions,” KNDS said in a statement late Wednesday, citing “current market volatility for the European Defense sector.”

It comes after the defense equipment maker was struggling to convince investors to back a valuation of more than 12 billion euros ($13.7 billion), sources familiar with the matter told CNBC. Media reports have previously suggested that the valuation could reach as much as 25 billion euros, but those expectations have since come down.

KNDS confirmed last week its intention to dual list in Paris and Frankfurt, in what would be one of Europe’s largest IPOs this year, without specifying a price or timing. It had been widely anticipated to proceed with a 20% flotation this summer, after the German and French governments came to an agreement earlier this month on joint ownership of the maker of Leopard ​2 tanks and Caesar howitzers.

KNDS declined to comment further on the reasoning for delaying the IPO.

Morningstar market strategist Michael Field told CNBC that KNDS could pursue its IPO later this year “if and when” sentiment improves.

“They are not in a bad position fundamentally, but it would be hugely counterproductive to list while sentiment is so low,” he said. “Some positive results in earnings season from KNDS and competitors could help, but its likely that investors will want to see a couple of quarters of good numbers before they are more enthused with the sector.”

In January, Czech-based defense firm Czechoslovak Group, or CSG, soared 33% from its IPO price on its first day of trading, only to later wipe out those gains. Its value has plummeted by around 60% since then.

German munition maker Rheinmetall has seen its stock plummet 32% year-to-date, including a nearly 19% drop earlier this week after the German government U-turned on plans to buy six large warships that had been expected to contribute billions to the company’s bottom line, further souring sentiment around defense stocks despite growing order books.

Smaller peers Hensoldt and Renk are also in the red over the year. Larger defense firms from around Europe, such as BAE Systems, Leonardo and Thales, have fared better, but still mostly underperformed the Stoxx 600 index, following massive gains since 2021.

PitchBook director Nalin Patel told CNBC last week that the “broad IPO market is still pretty challenging” in Europe, even though the defense sector represents a “huge growth area” with geopolitics front and center as governments

World leaders are heading to Turkey next week for the NATO Summit, where they are expected to review progress on nations’ spending goals that were agreed upon last year in The Hague.