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In 2000, I worked on the IPO of European Aeronautic Defence and Space Company (later renamed Airbus). It was a big deal at a heady time for markets, but the flotation proved a surprisingly tough sell.

Some fund managers shied away due to its anaemic profitability and complex governance, but several institutions — especially in Germany — had a more fundamental objection. They wouldn’t invest at all because of EADS’s exposure to defence and military activities.

Long before “ESG” had entered the investment lexicon, moral resistance to defence investing was already deeply entrenched in some European circles. The offering only scraped through on strong French and German retail demand, and the shares fell in the after-market.

By January 2026, the world looks very different. Last week’s €3.8bn IPO of Prague-based ammunition maker Czechoslovak Group has delivered the clearest signal yet that those blanket moral qualms have faded. Bankers involved told me every institution they approached was willing to engage. None pushed back on ethical grounds. Not one.

The success of the offering, with shares surging over 30 per cent on debut, reflects more than just attractive fundamentals or a valuation pitched at a deep discount to German arms manufacturer Rheinmetall on the basis of forward enterprise value-to-EBIT. It demonstrates how the Russian invasion of Ukraine and a deteriorating security environment have transformed attitudes towards defence. CSG’s role as a major supplier to Ukraine further assuaged investors’ ethical misgivings. 

What was once close to taboo in many investment mandates now borders on trendy. The Stoxx Europe Aerospace and Defence index gained 57 per cent in 2025 and is already up more than 8 per cent this January.

Moreover, investors also showed little concern that only €750mn of the proceeds represented new capital, with the remainder comprising a sale by chair Michal Strnad. Bloomberg reported that Strnad plans to use the proceeds in his family office to invest in non-defence businesses to avoid conflicts of interest. That’s normally not a great signal, but in this case the market shrugged.

Timing helped. With the Trump administration questioning its commitment to Nato while pressing European members to lift defence spending to 5 per cent of GDP, the push for European military self-sufficiency has become urgent. Investors see higher defence spending not as a cyclical boost but as a structural change in how Europe thinks about security.

The speedy IPO execution reflected the Zeitenwende in the policy Zeitgeist. After extensive pre-marketing, the formal offer period was compressed to three days. The order book was reportedly covered within minutes. That’s what happens when scarce supply meets genuine, urgent demand.

The cornerstone investors underline how borders have dissolved when it comes to allocating capital to European defence. BlackRock and Artisan Partners from the US, alongside Al-Rayyan Holding of the Qatar Investment Authority, committed upfront to buy €900mn in the IPO. A Czech defence group listing in Amsterdam with American and Middle Eastern anchor investors would probably have been unthinkable a generation ago.

The choice of BNP Paribas, Jefferies, JPMorgan, and UniCredit as global coordinators was as eclectic as it was revealing. Nowadays institutional investors will engage with almost any credible underwriter. Distribution has become commoditised, and the absence of several top ECM houses made little difference.

CSG did include one bulge bracket bank on the top line — JPMorgan, which also acted as stabilisation manager — presumably as insurance. But research rankings and salesforce size matter far less than they once did.

Balance sheet support likely mattered more in the selection of underwriters. Hot issuers can still extract commitments, even if banks cannot formally “tie” lending to investment banking mandates. Everyone understands how the game works.

The flotation of 15 per cent of CSG’s shares valued the company at €25bn at listing, making it Amsterdam’s largest flotation in a decade and Europe’s first major IPO of 2026. It sets the stage for what capital markets desks hope will be a busy year for defence-related equity issuance. Franco-German tank maker KNDS and British metal engineer Doncasters Group are reportedly preparing their own offerings.

The upshot is that moral concerns have not disappeared so much as been reinterpreted. Many investors now draw the line at internationally banned “controversial weapons” (later relabelled “prohibited weapons”) — such as anti-personnel mines, cluster munitions, and biological and chemical weapons — while treating conventional defence and dual‑use technologies as compatible with their mandates. In late 2025 the EU went further, revising its sustainable finance rules to reclassify nuclear weapons programs as ESG-compliant. 

As great‑power conflict once again becomes a plausible scenario, policymakers and fund managers increasingly argue that investing in the continent’s security can sit comfortably alongside — or even within — notions of social responsibility. Indeed, as FTAV recently explained, almost every European defence firm now qualifies for inclusion in funds with a sustainable investment mandate.

For now, defence is no longer a dirty word in European investing. It is a growth story and, in many influential quarters, an ethical one too.