According to the Financial Times, German authorities plan to review the program to build six F126 frigates due to delays and an expected increase in the project’s cost. The contract was awarded to Rheinmetall and was valued at approximately 10 billion euros, although, according to the FT, the total cost of the program could reach 12.8 billion euros.
The F126 frigates were supposed to be Germany’s largest warships since World War II. Instead, Berlin is considering purchasing eight smaller Meko A-200 frigates from ThyssenKrupp Marine Systems (TKMS). About 2 billion euros already allocated to the original program may be written off.
Following news of the order revision, Rheinmetall’s stock fell 20.28% to 930 euros per share. According to FactSet, this could mark the company’s largest single-day stock decline since 1989.
The decline also affected other European defense companies. Shares of Germany’s Hensoldt fell 6.51% to 66.66 euros, while Renk shares dropped 7.52% to 42.3 euros.
In other European markets, Saab shares fell 4.57%, Leonardo shares fell 5.59%, and BAE Systems shares fell 2.27%.
Against this backdrop, shares of TKMS (a German manufacturer of warships and submarines) rose 16.5% to 84.8 euros. The company may secure a new contract to build frigates for the German navy.
Investors’ reaction indicates that the market is factoring in not only rising defense budgets but also the risks associated with large government contracts—including timelines, project costs, and potential changes in customer requirements.
Previously, shares of defense companies had been rising on expectations of increased military spending in Europe and the United States. Additional interest in the sector emerged following the escalation of tensions surrounding Iran and subsequent military actions.
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