Arit Industries and Reshef Suffer Massive Losses Amid Defense Market Slump
Arit Industries and its subsidiary Reshef Technologies face steep valuation declines and heavy losses for institutional investors amid cooling global defense markets and falling revenues.
Ahit Industries, a prominent Israeli defense manufacturer specializing in fuses, has seen its market value plummet following a staggering rally driven by the war in Gaza. Late last year, the company, led by CEO Haim Shapler, executed a massive 900 million NIS private placement for its subsidiary, Reshef Technologies, after an initial public offering (IPO) attempt failed.
A newly released valuation report reveals a sharp decline in Reshef's value, wiping out approximately 380 million NIS for institutional investors who participated in the round. This heavy paper loss adds to another significant blow experienced by institutional funds earlier this year, when they acquired shares in the parent company, Arit, from controlling shareholder Zvi Levi at the peak of its valuation for 400 million NIS. That investment is currently sitting on an estimated loss of roughly a quarter of a billion shekels, with Arit's stock having dropped by about 70% since the acquisition.
Plunging Share Price and Cooling Defense Markets
Having reached a peak market capitalization of 7.2 billion NIS earlier this year, Arit's shares have experienced severe declines. Despite a minor rebound of over 10% this week, the stock has dropped by nearly 80%, bringing its valuation down to just 1.5 billion NIS. This downturn is primarily attributed to a decrease in demand for its products, reflected in weaker revenues and a shrinking order backlog, as well as a broader cooling of defense stocks globally amid a reduction in high-intensity military conflicts.
At the end of 2025, Arit initially attempted an IPO for Reshef Technologies at a valuation of 4.3 billion NIS. However, the plan was swiftly abandoned following fierce pushback from institutional investors. Critics pointed out that the move would turn Arit into a holding company trading at a steep discount, given that Reshef constitutes the vast majority of its operations.
Private Placement and Institutional Losses
To circumvent the failed IPO, Arit executed an alternative private placement of 600 million NIS for the subsidiary at a valuation of 3.75 million NIS, which was later expanded to 900 million NIS following the full exercise of options granted to participating institutional entities, including Clal, Phoenix Holdings, Meitav Investment House, and Mor.
According to an external valuation conducted by the economic consulting firm Fenigstein, Cohen & Co., the fair value of Reshef's shares at the end of the first half of the year stood at approximately 4.5 NIS, down 46% from 8.5 NIS at the close of 2025. Consequently, the value of the institutional investors' 22% stake in Reshef dropped to 520 million NIS, reflecting an approximate 380 million NIS paper loss in less than a year.
Weeding Out Weaknesses and Operational Slowdown
Arit's financial results for the first half of the year underscored the operational slowdown. Revenues declined by 14% year-over-year to 133 million NIS, while net profit plunged by 45% to 52.4 million NIS. The company projects full-year 2026 revenues of around 340 million NIS, representing a 42% drop compared to 2025.
Furthermore, Arit's order backlog stood at 671.8 million NIS at the end of the second quarter—including a conditional order of about 50 million dollars—marking a 10% decrease from the end of 2025 and a sharp decline from the 1.1 billion NIS recorded in the same period last year. In response to market volatility and shrinking portfolio values, management decided on an extraordinary dividend distribution of 529 million NIS, with 317.4 million NIS already distributed last month.
