KNDS, the Franco-German tank manufacturer, is encountering investor resistance ahead of its planned initial public offering (IPO), casting doubt on whether the flotation will proceed as scheduled. The company is aiming for a valuation of at least €12.5 billion, but some potential investors engaged in preliminary discussions this week have indicated that they believe the group’s worth would fall short of that target.

The company’s major German family shareholder, which holds a 50% stake alongside the French government’s ownership of the remainder, has reportedly insisted that the IPO will not move forward at a valuation below €12.5 billion. Earlier this year, valuations between €18 billion and €20 billion had been discussed. Ongoing investor meetings are intended to gauge demand, but sources close to the process suggest that if sufficient support at the desired valuation level is lacking, KNDS may delay the offering until later in the year or beyond. A final decision is expected to be made sometime next week.

KNDS, headquartered in Amsterdam, announced in May that it had secured a record order backlog exceeding €33 billion for 2025, driven by increased investment from European governments. The impending IPO is seen as a means to provide market exposure to the European defense sector. Despite this strong order book, broader investor enthusiasm for European arms manufacturers has diminished in recent months.

Analysts attribute this cooling in investor sentiment to shifting defense priorities away from traditional heavy machinery like tanks toward more cost-effective drone technologies. Additionally, production challenges and recent profit-taking have contributed to uncertainty within the sector. The Stoxx Targeted Defence index, which tracks major European defense companies, has remained largely flat for 2026 despite a promising start to the year.

The recent decline in defense stocks was intensified when Germany cancelled a multibillion-euro warship contract last week, causing shares in Rheinmetall, Germany’s largest defense firm, to plunge nearly 20%. This development coincided with KNDS’s formal launch of its IPO process, prompting frustration among those involved, who cited poor coordination within the German government and described the situation as a lack of aligned policy.

Prior to Germany’s cancellation, KNDS’s expected valuation range had already narrowed to between €12 billion and €15 billion from the earlier €18 billion to €20 billion estimates. Rheinmetall’s stock performance is viewed as a key benchmark for potential investors assessing KNDS’s valuation, and its shares have declined around 38% year-to-date, including last week’s sharp drop.

Both KNDS and representatives of its German family shareholders declined to comment on the IPO process. The company and its advisers continue to engage with investors in hopes of securing support for the offering at the targeted valuation.