Defense Firm Owner Sells Shares at Peak, Institutional Investors Lose Quarter Billion Shekels

The stock of artillery and mortar fuse manufacturer Arit Industries, which had seen a meteoric rise in recent years, has plummeted approximately 60% since the beginning of the year, contrasting with a 16% increase in the TA-35 index. This decline has resulted in significant losses for institutional investors who purchased shares worth 400 million shekels from controlling shareholder Zvi Levi around the stock's peak. These investors are estimated to have lost about a quarter of a billion shekels.

Levi, a businessman who acquired control of Arit two decades ago for a few million shekels, capitalized on a 6,630% stock surge over three years. He sold a 7% stake for approximately 395 million shekels shortly before the stock reached its zenith in late January, when his holdings were valued at about 2.8 billion shekels on paper. This sale followed a smaller divestment of 50 million shekels the previous year. The buyers included major foreign investors, along with insurance companies Menora and The Phoenix, and investment house Mor.

The stock's collapse is attributed partly to a general cooling of investor enthusiasm for the defense sector, with concerns about inflated valuations and a perceived easing of conflict zones. More specifically for Arit, business performance has weakened. First-half revenues fell by 14% year-over-year to 133 million shekels, and net profit dropped 45% to 52.4 million shekels. The company anticipates 2026 revenues of 340 million shekels, a 42% decrease from the previous year. Arit's order backlog stood at 672 million shekels at the end of the second quarter, significantly lower than the 1.1 billion shekels recorded in the same period last year.

Despite the downturn, Arit announced a substantial dividend distribution of approximately 529 million shekels, with 317.4 million already paid out. The remainder is contingent on court approval for profits from the sale of about 11% of its subsidiary Reshef. In recent months, Arit has secured orders totaling $16 million from India's Bell company, won a tender for artillery fuses from a North American country, and expanded into the European market with a NATO agreement, alongside establishing a production base in the US.