Defense Stocks Plunge Amid Major Shareholder Sell-Off

A significant sell-off of shares in Israeli defense tech firm NextVision by Fidelity, a major shareholder, has triggered a sharp decline in the company's stock, which has subsequently spread to the broader defense sector on the Tel Aviv Stock Exchange. The defense stock index, which peaked in March following the "Operation Iron Swords" war, has lost nearly half its value and is now trading below its initial offering price. The steepest declines have been observed in NextVision and Arit Industries.

The sell-off began last Tuesday after market close when reports emerged that Fidelity had sold most of its holdings in NextVision. This led to three consecutive days of losses for the company's stock, erasing a quarter of its value. The market's strong reaction, with the stock falling nearly twice the discount Fidelity reportedly offered, suggests investors interpreted the sale as a negative signal, especially given the stock's existing downward momentum. However, sources close to the deal indicated that Fidelity's sale was due to procedural changes within a specific fund requiring it to divest from certain holdings.

NextVision, known for its stabilized day and night cameras for vehicles and aircraft, had experienced extraordinary growth, with its stock yielding nearly 5,000% in three years. This surge was fueled by strong business growth and increasing demand for advanced imaging systems. However, the stock, like other defense companies, traded at a very high multiple, benefiting from investor enthusiasm driven by global conflicts and increased defense spending.

The downturn in defense stocks had already begun before Fidelity's sale. The defense index, launched in November 2025, reached a high of over 5,500 points in March but has since fallen to around 3,000 points, an approximately 8% drop in the past week and a nearly 50% decline from its peak. It is currently trading about 10% below its launch level.

Arit Industries, which manufactures electronic fuses for ammunition, has also seen a severe drop, losing over 80% of its value from its peak. This decline is attributed to several factors, including a failed IPO attempt for its subsidiary Reshef Technologies at an unfavorable valuation and a subsequent private placement that excluded public shareholders. The company also announced a large dividend payout alongside weak quarterly reports, raising investor concerns about its management and valuation. Business data shows a decline in Arit's revenues and net profit in the first half of 2026 compared to the previous year, with a significant drop in net profit in the second quarter alone.