[BERLIN] A 1 euro bet on a struggling Austrian engine maker has turned into one of the hottest investments in Europe thanks to the boom in defence stocks.
German private equity firm Mutares paid the token price for Steyr Motors back in 2022 and is now reaping the gains – both through the 1,600 per cent surge in Steyr’s shares and in its own stock price, which doubled in just six months.
The moves are a testament to the momentum behind military stocks. The US under President Donald Trump is pulling back on its security commitment to Europe, prompting nations to ramp up spending on weapons. With US stocks struggling and Europe the hot market of the moment, everyone from day traders to hedge fund managers has been snapping up anything with a military angle to it.
“The defence story has massively blown up and the major institutional and thematic funds need to align with it – there is simply not enough paper,” said Jayadev Mishra, a portfolio manager at Bank J Safra Sarasin.
Steyr, which makes engines for tanks and boats, listed on the Frankfurt Stock Exchange in October after a private placement at 14 euro a share – just in time for the early 2025 investor frenzy for anything defence-related. At their peak last week, Steyr shares closed at 240 euros, up 1,614 per cent from the placement price five months earlier.
Mutares, which still owns 71 per cent of Steyr, soared right along with it, more than doubling from its low in September, when the investment firm was fending off a critical report by short seller Gotham City Research.
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Both stocks have now come back to earth a bit. Mutares said last week it wants to sell some of its Steyr shares, sending the engine maker’s stock plunging to 62 euros.
Steyr is still up 343 per cent from the private placement price, while Mutares is 65 per cent above its 2023 low.
Mutares bought Steyr from French defence contractor Thales, which in turn had purchased the company out of administration three years earlier.
The Munich-based buyout firm specialises in buying companies that have stumbled and need an overhaul. Mutares put in place what it called “a very rapid operational turnaround” at Steyr before listing the company in October.
One of the reasons Steyr shares soared so much is that the company is small, with a market value of 322 million euros (S$464.9 million), and the supply of stock is limited given the size of the Mutares stake. On average, about 64,000 euros of shares changed hands each in day in Steyr’s first three months as a listed company.
Selling more shares will improve liquidity for the stock, Mutares said. The German firm said it intends to remain a major shareholder.
Steyr’s diesel engines are used in boats operated by the US Navy Seals and as auxiliary power in Leopard 2 tanks. The company is benefiting from the defense buildup – Steyr forecast that sales will surge at least 40 per cent in 2025, with a profit margin of at least 20 per cent.
“We do not see a direct impact from the share price development, apart from the immense media attention,” Steyr chief executive officer Julian Cassutti said in an emailed statement. “The trajectory was somewhat surreal, but ultimately a product of the market.”
Investor interest in the company has increased because of its strong operational performance and Germany’s decision to increase defence spending, he said.
Steyr is the subject of a lively discussion on Reddit message boards about how long the rally can last.
“Until my hairdresser tells me about it, then it’ll be time to sell,” said one user. “The minute my dad told me about it, it started to dip,” said another. BLOOMBERG
