KNDS Pushes Ahead With Dual Listing as Order Book Swells to €33bn and Defense Stocks Tumble

KNDS proceeds with IPO amid defense rout, betting on long-term demand. The Leopard tank maker aims for €12-15B valuation, with governments holding 80% control. Revenue forecast up 30% in 2026.

The timing could hardly be more awkward. European defense shares have been routed this week — Rheinmetall alone plunged 18% on Wednesday after reports of cancelled naval contracts from Berlin — yet the Franco-German tank maker KNDS is pressing ahead with one of the continent's largest initial public offerings in years. With an order backlog of €33.1 billion, equivalent to nearly seven times last year's revenue, the manufacturer of Leopard tanks and Caesar howitzers is betting that long-term demand for battlefield hardware will outweigh the current market jitters.

KNDS generated €4.4 billion in revenue in 2025, a 16% increase from the prior year, while operating profit hit €661 million. Management now expects to accelerate that pace dramatically: 2026 revenue is forecast to grow by roughly 30%, even as the operating margin compresses to around 12% because of heavy investment in new production capacity. The company is ploughing €750 million into plant and equipment this year alone, part of a broader push to lift medium-term revenue to €12 billion and restore margins to 15%. Shareholders are promised a dividend payout ratio of approximately 40% of net profit starting in 2027.

Government control will remain tight long after the listing. Before the IPO, Germany's state-owned development bank KfW will acquire a 40% stake from Wegmann, the former German owner. France's state holding GIAT will also hold exactly 40%, giving the two governments equal influence. Only 20% of the shares will be placed with institutional investors; retail buyers are shut out entirely. The two sovereign shareholders have agreed to a ten-year lock-up, and any sale that takes either stake below 30% requires the other side's consent — effectively barring a conventional takeover battle. To further discourage churn, holders who keep their shares for at least two years earn double voting rights.

Analysts have assigned the group a valuation of between €12 billion and €18 billion, with some narrowing the range to €12 billion to €15 billion. The dual listing is slated for both Frankfurt and Paris, likely around mid-July, though an exact date has yet to be confirmed. The float will consist entirely of existing shares — no new capital is being raised — and will be offered exclusively to institutional investors.

Yet the roadshow faces stiff headwinds. Beyond the sharp sell-off in Rheinmetall, other major defense names have suffered heavy losses as investors fret over potential budget shifts and the sustainability of high spending. KNDS's own margin outlook for 2026 reflects the strain: margins are expected to slip from the 2025 level as lucrative legacy contracts expire and the cost of capacity expansion bites. The company insists that the long lead times in tank building and the booming ammunition business provide a cushion, and the EU's defense budgets — set to rise to €381 billion — underpin the fundamentals.

Investors will be watching for signs that the Franco-German power-sharing structure might limit strategic flexibility or dividend policy. The double voting mechanism and the joint state veto effectively freeze the ownership structure for a decade, a design that prioritizes national security over shareholder activism. The arrangement also sidesteps the usual IPO tension between founders and new investors: the states are staying put, and minority holders get little say.

Despite the turbulence in the sector, KNDS is moving forward with conviction. The €33.1 billion order book — more than the combined annual revenue of several smaller European defense firms — backs up the argument that the current market gloom is temporary. Whether the valuation of €12bn to €18bn sticks in a jittery market will be tested when the bankers open the books next month.