Israel’s Two Giant State-Run Defense Companies May Go Public, But There Are Hurdles

After years of backroom deliberations, two state-owned Israeli defense giants may soon pull the trigger on going public in a bid to capitalize on the surging global demand for defense stocks.

But challenges remain, like how the government, which currently owns both Rafael and Israel Aerospace Industries (IAI), would handle concerns over state secrets and union interests, as well as what the terms of an initial public offering would look like.

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“The defense market is booming all over the world and especially in Israel. If you want to go for an IPO with Rafael and IAI, this is the time,” said Yaacov Ayish, the Senior Vice President for Israeli Affairs at the Jewish Institute for National Security of America (JINSA). “IAI is very into it in the last two years. In terms of being ready, they are more ready than Rafael. The opportunity is the same with both of them.”

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With Israel’s record defense budget of $45 billion in 2026 also straining the deficit, there is much to be gained by raking in billions. And with Israel’s defense exports at an all-time high of around $19 billion in 2025, IAI and Rafael want to capitalize and the government may be finally willing to let go of an ownership stake of 30-40 percent of the defense giants.

But hurdles remain for the two government defense giants. Going public raises questions about how Israel would safeguard state secrets and other classified information at the two companies, which make systems such as Iron Dome.

“How do you, on one hand, protect those secrets — such as space and missile defense — and many other exotic and exquisite technologies, such as navigation,” Ayish said. “This is a challenge.”