WHY DOES DRONESHIELD (asx: dro) RESONATE SO STRONGLY WITH GERMAN INVESTORS

Droneshield (ASX: DRO) has been shooting the lights out over the past 12 months.

The Company’s share price was A$0.38 on 1 January 2024 and has climbed rapidly to close at A$1.48 on 24 July 2024 with a market cap at around A$ 1.1 billion. The stock briefly hit a record high of A$2.60 on 15 July.
The Company released its H1 2024 results this week showing revenues of A$24.1 million, up 110% on 1H23 ($11.5 million). This was the highest ever first half year revenues in the Company’s history. H1 2024 customer cash receipts of $21.4 million, up 40% vs 1H23 ($15.3 million). However, there was disappointment from investors on sales growth and net cash outflows (A$ 29 million for the 6 months).

Droneshield is also listed on all the major German exchanges of Frankfurt, Stuttgart and Tradegate.

What is truly remarkable is the passion with which German retail investors have embraced the company. In July 2024, the company has seen around 20% of its ASX volumes on German trading exchanges and considerable German language discussion of the company on European equity forums and reddit.

Why is this?

There are several reasons.

Great Narrative. Companies should never forget the power of narrative and images to engage with retail investors. Droneshield has done this very successfully. A clear strategy of use of multi-layered Artificial Intelligence to fight drones – simple and arresting. Plus, a skilful use of video and media to develop that narrative.

German Media engagement. Droneshield has successfully developed relationships with German stock media such as Der Aktionär and these assists develop German retail engagement.

Strong sales growth. The main reason for retail buying according to studies is the expectation of future cash flows – either in form of dividends or capital growth from sale of shares. Both require sales growth. Droneshield reported sales of A$24 million in H1 2024 – up from $A 11 million in H1 2023.

Ukraine war and reliance on drone technology. The war in Ukraine has been characterised by massive drone deployment, with thousands of unmanned aerial vehicles (UAVs) used to track and attack enemy forces, guide artillery and bomb targets. In Ukraine over 2,000 SMEs are working on drone technology. This is also feeding significant media interest in Germany and Europe.

Understanding the German equity markets. Due to the nature of German Stock Exchange regulations, there are very few small and mid-cap companies with a primary listing on Frankfurt. There were only a dozen primary German listings on Frankfurt Stock Exchange in last 2 years including Porshe. Most small and mid-cap companies in German are private or owned by venture capital. Therefore, retail investors wanting to invest in publicly traded small-mid cap companies (particularly in biotech, CRM, and tech sectors) are drawn to companies with a primary listing on ASX or TSX.

In these markets with low liquidity in the small and mid-cap market, companies should think about maximising their primary exchange listing and looking a dual listings such as Germany and Frankfurt Stock Exchange. 
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