Airo Group Holdings, a small-cap drone maker, has soared to nearly three times its IPO price in the first two days of trading, though shares were offered at well below the expected price. Airo is set to benefit as demand for military drones grows worldwide, analysts say.  

Details

Airo has got a bump in the first two trading sessions, almost tripling. The IPO took place last week, with 6 million shares sold at $10 each. The price was well below the originally announced range of $14 to $16 per share, which likely indicates a lack of institutional demand, MarketWatch notes. However, on Friday, June 13, the first day of trading, shares jumped 140% to $24 apiece. That was when Israel launched air strikes on Iran with the goal of stopping its nuclear weapons program. On the second day of trading, yesterday, quotes added another 29% to $31 per share. 

«It’s unusual to see a company price below its indicated range and then pop 140% [on its first day] – that can indicate a lot of retail demand,” Renaissance Capital analyst Matthew Kennedy told MarketWatch. “And indeed, individual investors have a history of betting on smaller, unprofitable companies, particularly those developing advanced technology.»

This morning, Airo has extended the gains, up nearly 9% in premarket trading as of this writing.

What's behind the stock's growth

The gains have come amid increased interest in drone technology worldwide, driven in part by the «prominent role» of drones in the Russia-Ukraine war, wrote industry new site dronlife.com. Low-cost drones have transformed battlefield surveillance and tactics, greatly increasing risks to infantry and equipment, Barron's argues.

“The success of Ukraine’s recent attack on Russian airfields using drones has made a strong case for this company’s products. The escalating conflict in the Middle East may also fuel future demand. It’s grim to say, but stocks like this tend to benefit from global conflict,» Kennedy of Renaissance Capital believes.

Airo itself, in its IPO prospectus, also cited rising military spending and investment around the world as a factor for growth. The company also published its financial results for 2024: Revenue doubled to $86.9 million, while its net loss grew 19.2% to $38.7 million.

Retail demand may have also been spurred by Trump's recent executive order, “Unleashing American Drone Dominance,” that aims to ramp up U.S. production of drones and expand the export of American-made drones, MarketWatch notes.

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