Israel Aerospace Industries Eyes IPO as Air Force Stands Up New Heron MK-2 Squadron at Hatzor

The Government Companies Authority committed in January 2026 to floating part of Israel Aerospace Industries (IAI) on the stock exchange, at an estimated valuation of 80-100 billion shekels, with an Israeli delegation expected to travel to New York in mid-July 2026 to explore a Nasdaq listing alongside the Tel Aviv Stock Exchange. At the same time, the Air Force is standing up a new squadron of Heron MK-2 drones at Hatzor Airbase, roughly 20 aircraft priced at about $10 million apiece, against the backdrop of a fivefold increase in drone flight hours since October 7, 2023.

Is the state pushing for an IAI IPO this year?

Roy Kalfon, CEO of the Government Companies Authority, said the offering could launch as early as this year, around the time IAI publishes its financial results for the first half of 2026. The elections expected in October 2026 loom as a major timing question mark, and it remains unclear whether the process will survive the crowded political calendar. The state plans to float 25-30% of the company's shares while retaining 70-75% control.

• Estimated valuation: 80-100 billion shekels (about $27 billion)
• Planned offering size: 25-30% of shares
• Possible venues: Nasdaq in New York or the Tel Aviv Stock Exchange
• Delegation visit to New York: mid-July 2026
• IAI's current order backlog: $25 billion

Boaz Levy: 'This is vital for the state and the company'

Boaz Levy, appointed chairman of IAI in May 2026, said the company is waiting for the process to actually begin: 'We're waiting for the process to start. It's vital for the state and for the company. I believe it will happen.' CFO Eran Anchikovsky described the move as an opportunity to shift 'from small jumps to giant leaps' in revenue growth. According to Kalfon, the IPO would let IAI compete in the global market, offer competitive salaries and stock options currently barred to it as a state-owned company, and pursue acquisitions at a faster pace.

Rafael Advanced Defense Systems is weighing a similar offering in parallel, at an estimated valuation of 50-60 billion shekels. Elbit Systems, the only Israeli defense company already publicly traded, serves as the benchmark for both firms.

What obstacles still stand in the way?

The IPO is far from a purely technical matter. These are companies steeped in classified defense secrets, with organized labor forces and a government struggling to decide how to structure the deal.

• Protecting classified technology: possible spinoff of sensitive divisions, similar to the precedent set by Israel Military Industries' Tomer division
• Worker opposition: roughly 15,000 unionized employees at IAI
• Need for new security clearance mechanisms for external board members
• Reported disagreements between the Government Companies Authority and the Finance Ministry over the deal's structure

Israel's defense industry is backed by impressive figures: $19 billion in defense exports in 2025, and a $45 billion defense budget for 2026. These numbers are what make floating IAI and Rafael attractive in the state's eyes, even if the practical path ahead remains littered with regulatory and political hurdles.

Is a new Heron MK-2 squadron being set up at Hatzor?

Alongside the IPO push, the Air Force is establishing a new drone squadron of Heron MK-2 aircraft at Hatzor Airbase in southern Israel, next to an existing Heron squadron. The deal involves the purchase of roughly 20 aircraft from IAI, at about $10 million per single aircraft, plus a separate cost for payloads such as EO/IR surveillance cameras. The first aircraft are expected to arrive within about a month of the report, with the squadron set to be declared operational by summer 2026. The IDF declined to disclose the total value of the contract.

Colonel K., an officer from the Air Force's Remotely Piloted Aircraft Systems Division, said drone flight hours have risen roughly fivefold since October 7, 2023, compared with hundreds of thousands of annual flight hours before the war. In his words: 'We need a significant number of remotely operated aircraft, and we're in a process of rapid buildup.' Missions include intelligence gathering, real-time monitoring and strikes, over Lebanon, Syria, Gaza, the Red Sea, Yemen and maritime infrastructure, with some reports also pointing to long-range missions toward Iran.

What are the Heron MK-2's technical specifications?

The Heron MK-2 is an upgraded version of the original Heron, featuring automatic takeoff, flight and landing capabilities and satellite communications not found in the base model.

• Length: 8.5 meters
• Wingspan: 16.6 meters
• Payload capacity: 490 kg
• Maximum takeoff weight: 1,430 kg
• Endurance: about 45 hours
• Service ceiling: 35,000 feet
• Maximum speed: 150 knots
• Range: over 1,000 km

This is a significantly smaller aircraft than IAI's larger Heron TP ('Eitan'), which offers a payload capacity of 1,000 kg, a range of 7,400 km and an endurance of about 36 hours. Germany purchased three Eitan-based systems, including ground systems, munitions and training, in a deal worth about $1.2 billion. The Air Force's broader drone fleet also includes Elbit's Hermes 450 ('Zik') and Hermes 900 ('Kochav'), with the larger-payload Hermes 650 expected to join the fleet within about two years.

The timing of these two parallel stories, a possible IPO and an unprecedented pace of procurement, is no coincidence. IAI is trying to prove to the capital markets that it's not just a veteran defense supplier but a growth company with real operational demand. The engineering and operational success of the company's entrepreneurs and engineers over the decades is what now makes it possible to even talk about a valuation of tens of billions of shekels, but whether the market will price it accordingly remains an open question.