CSG’s Defence of Its Ammunition Output Fails to Calm Jittery Investors

The Czechoslovak Group (CSG) is fighting to regain its footing after a brutal short-seller assault erased nearly a third of its market value in a single month. The Prague-based ammunition manufacturer, which staged Europe’s largest defence IPO in January, now finds itself in a war of words with Hunterbrook Capital, a US-based activist short seller that has questioned the very foundations of its business model.

Hunterbrook’s report, published last week, alleged that CSG is not the high-volume munitions producer it claims to be. Instead, the short seller argued the company primarily refurbishes old ammunition rather than manufacturing new rounds. According to Hunterbrook, CSG’s own production capacity is limited to roughly 280,000 shells — a far cry from the half-million units touted in its IPO prospectus.

The accusations sent shares into a tailspin. The stock hit an all-time low of €15.73 on Monday, down nearly 32% over the previous 30 days. It has since clawed back some ground to trade at €17.45, but remains well below its listing price.

Management Fires Back With Detailed Rebuttal

CSG’s leadership responded swiftly, issuing a point-by-point refutation of Hunterbrook’s claims. The company insists the short seller selectively quoted data and misunderstood its decentralised production network, which spans facilities in Slovakia, Spain, Serbia, Greece and India.

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Far from the 280,000 shells Hunterbrook estimates, CSG says its own manufacturing capacity stands at around 630,000 rounds. Next year, it plans to boost that figure by a fifth. A new production line in Slovakia is already under construction, and the company has set a medium-term target of exceeding one million shells annually.

On the financial front, CSG confirmed that a three-digit-million-euro receivable from related parties — flagged by Hunterbrook as a potential red flag — was fully settled in the first quarter, exactly as outlined in the IPO timeline.

Revenue Guidance Holds Despite Market Turmoil

The company is standing by its full-year forecasts. Management reiterated expectations for revenue between €7.4 billion and €7.6 billion in 2026, with an operating margin of roughly 24%. The outlook is underpinned by sustained demand across its defence divisions and the integration of the recently acquired Kinetic Group.

CSG also sought to clarify the nature of its much-touted €14 billion order backlog and the multibillion-euro framework agreement with Slovakia. The company stressed that the latter is a seven-year procurement roadmap, not a series of immediately guaranteed contracts — a nuance the short seller’s report had conveniently omitted.

Analysts Circle the Wagons

Wall Street has largely rallied behind the embattled defence group. All nine analysts covering the stock maintain buy ratings, with a consensus price target of €35.40 — implying roughly 92% upside from current levels. Morgan Stanley described the sell-off as purely sentiment-driven, pointing to CSG’s solid credit ratings from Moody’s and Fitch.

J.P. Morgan is even more bullish, rating the shares “Overweight” with a €40 target. The bank highlights CSG’s high margins and its position as Europe’s second-largest supplier of large-calibre ammunition as key competitive advantages.

The stock responded positively to the management’s transparency push, climbing nearly 8% on Wednesday to €17.35. But the recovery remains fragile.

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The Real Test Arrives May 20

Investors are now looking ahead to May 20, when CSG will publish its first quarterly report since going public. The release will be the company’s first opportunity to back up its verbal defence with hard numbers on production, order conversion and cash flow.

If the data confirms strong demand and validates CSG’s production claims, confidence could begin to return. If not, the short sellers may yet have the last word.

The broader backdrop remains supportive. Last year’s NATO Hague Declaration, which calls for member states to spend 5% of GDP on defence, promises a sustained tailwind for European arms manufacturers. For CSG, the question is whether it can convince the market it has the industrial capacity to capitalise on that opportunity.

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