US President Donald Trump has kicked off 2026 in dramatic style, with the extraction of Venezuelan President Nicolas Maduro and threats to invade Greenland focusing European minds even more on increased defence spending.

As the globe emerges into the “undiscovered country” of a new world order, European defence IPOs are increasingly eyed as a solid play on this most consequential of secular trends.

Stock markets have played their part, with European defence contractors soaring – particularly Germany’s Rheinmetall, the tank maker which has seen an astronomic growth in valuation ever since Russia’s invasion of Ukraine in 2022; the German firm has risen by almost 20% since the start of January.

Indeed, the Stoxx Europe Total Market Aerospace & Defense Index climbed over 12% between the start of the year and 9 January.

Despite global exuberance over AI and US tech giants in the last 12 months, this small basket of European defence stocks has significantly outperformed the NASDAQ 100 since the start of 2025.

Geopolitical volatility caused by Trump’s Venezuela adventure and his hawkish posturing over Greenland further underscore the salience of this trend.

Such is the desire of global investors to seek even greater exposure to European defence equities that the sector is seen broadly, alongside AI investment, as one of the defining megatrends driving global equity markets.

But the universe of such listed companies is hardly numerous, and positions can take a long time to build to a meaningful level.

Luckily there is a platoon of European deals ready to burst into the fray to meet investor demand, with major sector IPOs offering the opportunity to build positions quickly – and at a discount to established, and now expensive, peers like Rheinmetall or the UK’s BAE systems.

First into the breach is Czechoslovak Group (CSG), the Czech defence manufacturing conglomerate expected to launch an IPO in Amsterdam this month, the first major test of Europe’s IPO market.

The deal is expected to be a multi-billion-euro listing, with a valuation perhaps as high as EUR 30bn, linked to the huge move in Rheinmetall since the start of the year.

CSG is likely to be followed later in the year by the dual-listing of Franco-German defence business KNDS.

Alongside these two behemoths, the smaller listings of German defence electronics company Vincorion and Polish drone manufacturer WB Electronics are also in the works for this year.

All these businesses were already likely to be in vogue given the huge defence spend linked to the war in Ukraine and then the expected structural shift towards European rearmament in the face of a more aggressive Russia.

The US’s positioning since the beginning of the year only make this rearmament need even more pressing for Europe’s strategic autonomy.

Two bankers noted that IPO activity this year is set to be dominated by the asset class, with even more RFPs for defence listings later this year being sent to top equity houses this month.

One of the bankers noted that if it all came to market, the sector would represent, by far, the largest contributor to newly listed aggregate market cap on European stock exchanges this year.

The demand is also broad and multi-faceted, with ECM investors wanting exposure to large multinational industrial munitions manufacturers.

“We’re getting plenty of reverse enquires from investors across all defence subsectors,” said a third banker. “The only thing people want to avoid is having too much concentration on one subsector.

“People want tanks, artillery, defence tech exposure. Not one stands out. The rising tide will lift all boats.”

Revival of a mega trend

The huge popularity of European defence, and its position as the dominant asset class in Europe’s 2026 IPO calendar, represents a remarkable turnaround given its unpopularity before the war in Ukraine, driven mainly by investors’ ESG criteria.

The same banker noted that several global tier-one investors were changing course on investment criteria to allow greater capital deployment into defence, with an eye on Europe’s sector IPO pipeline.

Last year, it was reported that Norway was reviewing whether to allow its sovereign wealth fund Norges Bank to invest in certain defence businesses, reversing a 21-year ban.

“Defence is a major investment thematic now,” said an ECM investor. “It feels like a bold decision not to invest in that space now for ESG reasons given the core investment thesis that backs it.”

Not all investors have reversed their restrictions on defence investing but, for most, an investment in European businesses providing munitions for the continent’s defence is almost an ESG positive, multiple market participants said – and on a pure performance basis, it’s a trend most cannot ignore.

Securing significant allocations at IPO will allow investors to quickly build meaningful positions in defence stocks without having to buy already expensive listed businesses in small chunks.

Another benefit of the sector is that it has almost no exposure to the AI investing wave.

While AI arguably remains the technological revolution of the century, concerns have begun to grow among investors given rapidly rising valuations. Questions are emerging over circular financing, prompting speculation that AI, and tech stocks linked to it, are in a bubble.

Equity strategists have already started the year encouraging investors to shift into non-tech linked stocks and seek exposure to a broader equity recovery, with increased focus on industrial and cyclical names less exposed to AI. Defence is a growth asset class that can give real diversity.

“If you are looking for exposure away from a concentrated US market, focused on AI, these defence names have a lot of appeal,” said the investor.

The dynamics of defence investing could yet change in 2026, perhaps with the end of the war in Ukraine and a shift in US foreign policy, that makes European defence stocks less attractive.

But for now, it is a clear theme for the 2026 IPO market and one that is supported by a multitude of headlines and geopolitical shifts.

“To be honest, with all the tailwinds behind defence, if the CSG IPO doesn’t work we might as well all pack our bags and call the end of the year early,” noted a second investor.

With global leaders seemingly drawn to “cry havoc and let slip the dogs of war”, investors are now keener than ever to lend their ears to European defence businesses seeking to enter the IPO fray.