A familiar trend is set to dominate Europe’s batch of initial public offerings over the coming weeks: companies benefiting from higher defense spending by the continent’s governments.
Stocks across military communications and equipment will add to the standout theme of the continent’s equity fundraising markets this year. Tankmaker KNDS NV is considering launching a multibillion euro offering as soon as this month, while thinly traded satellite maker OHB SE is also said to eye June for a “ re-IPO ” that could raise more than €1 billion ($1.2 billion), Bloomberg News has reported.
Military antenna maker Smag Mobile Antenna Masts GmbH , is said to mull launching its Frankfurt IPO as soon as the coming months . Meanwhile, Finland’s Savox Communications, a provider of tactical communication devices, is set to start trading on June 18, it said in a filing on Monday.
The prospect of lower valuations may entice investors to take part in the offerings. Stocks in the industry rallied at the start of this year, but have since lost steam . A basket of European defense stocks selected by Goldman Sachs Group Inc. is trading 20% lower than its peak at the start of this year.
Some investors looking at European defense “might have previously been on the sidelines thinking ‘this is too expensive,’” Silvia Viviano, head of equity capital markets at UniCredit SpA, said. “The fact that defense and aerospace valuations have come down probably gives them an opportunity now to invest.”
The defense theme has been led by ammunition maker CSG NV, which in January held the largest defense IPO to date. Other firms like Vincorion SE, a German supplier of power systems for military vehicles including KNDS’s Leopard 2 battle tank, and submarine parts supplier Gabler Group AG have also gone public this year.
They’re pressing on with their preparations even as the market’s focus turns to SpaceX’s $75 billion US listing for the next few days, with OHB and KNDS considering launching their own offerings shortly after the IPO has priced.
“Defense is probably the sector where the risk of overlapping with those large US offerings is more limited,” said Viviano. “Equally, the space sector is becoming much more strategic to Europe.”
The plans come as equity markets have stayed resilient despite the ongoing conflict in Iran, with volatility levels within what is considered to be tolerable for an IPO.
To be sure, there are companies in other sectors that could tap what dealmakers refer to as the pre-summer window. German landlord TAG Immobilien AG started the process for an IPO of its Polish residential unit Robyg SA in Warsaw on Monday. Gold merchant Gens Aurea SpA is also considering an IPO in Milan that could raise as much as €500 million, Bloomberg News reported in May.