An old stock market adage says: If a gold rush comes, don’t start digging, but invest in shovels. Your current version has a slightly darker tone: If crises and wars occur, don’t start shooting, but invest in tanks. Or, as in this case, the engines for it. Because that’s what the Augsburg arms supplier Renk is all about, which dared to go public on Wednesday. And the wisdom comes true: the share price has since skyrocketed by over 40 percent to just under 22 euros.
It was the second attempt to go public. At the end of 2020, the financial investor Triton bought the then VW subsidiary Renk and took it off the market. An IPO was then planned for October 2023. The circumstances were, if you can call it that, good: the company is benefiting from the return of wars and conflicts worldwide. The war in Ukraine has caused the need for tanks to rise sharply, and the turning point announced by Chancellor Olaf Scholz (SPD) caused shares of other defense companies such as Rheinmetall to skyrocket.
Sales increase during war
Renk had sales of around 850 million euros in 2022 and, according to early information, was aiming for one billion for 2023, but has not yet presented any figures for the full year. In October, the company was targeting a stock market valuation of 1.5 billion. Almost double what Triton had paid for the takeover three years earlier.
But a budget dispute between Republicans and Democrats in the USA at the time called into question further funding for Ukraine – and with it the demand for heavy artillery. Triton called off the IPO at short notice and, a few days ago, announced a second attempt at almost as short notice for last Wednesday. With some success: Triton sold 33.3 million Renk shares within two days for a total of 500 million euros, which accounts for a third of the company. Demand was so great that the issue was increased by 50 million at the last minute. Renk is now valued at 1.75 billion euros.
The problem: the blockade of the US Republicans
Just in time, you might think. Because: Aid to Ukraine from the USA is currently in question again. On Wednesday evening, Republicans in the Senate blocked a Democratic bill that would have linked aid to Ukraine and Israel to border security measures demanded by conservatives. The European Union recently agreed on aid worth 50 billion euros over four years for Kiev. Since Russia is currently making no move to stop its invasion, this will probably ensure demand for tanks for a while. At least investors seem to see it that way.
However, the Democratic faction leader in the US Senate, Chuck Schumer, wants to have military aid voted on again, this time without additions to the border and immigration. However, the outcome is still uncertain, especially because even if the draft is approved, the Republican-controlled US House of Representatives still has to vote.
Either way: Renk is now on the stock exchange, and one of its largest customers invested the most. The tank manufacturer KNDS bought 6.7 percent of the shares for 100 million with the possibility of increasing to 25 percent. The arms company is a major customer of Renk, and the investment represents increased solidarity within the industry. In times of violent conflict, Renk is increasingly in demand. The company already supplies the transmissions for most types of Western tanks. The US asset manager and arms investor Wellington also bought Renk shares worth 50 million euros. European investors are traditionally cautious about investing in the defense industry.