New York, Jan 13, 2026, 20:08 EST — Market closed.
- The Pentagon is set to make a $1 billion convertible investment in L3Harris Missile Solutions, aiming for an IPO in the latter half of 2026
- L3Harris shares ended close to unchanged following an initial surge on the news
- Investors are focused on deal mechanics, Washington oversight, and L3Harris results due later this month
L3Harris Technologies, Inc. announced the Pentagon will invest $1 billion in its Missile Solutions unit, paving the way for that segment to spin off as a separate publicly traded company. An IPO is planned for the second half of 2026. On Tuesday, L3Harris shares edged up about 0.2%, closing at $341.24. 1
This shift matters because it brings the government nearer to the production line. Rather than depending solely on contracts, the Pentagon aims to secure the supply of solid rocket motors — a critical bottleneck in missile manufacturing — by adopting a setup resembling project finance instead of the usual procurement methods.
The move underscores urgency. The Pentagon is promoting the investment as a “direct-to-supplier” model aimed at accelerating capacity growth, though it still requires Congress to approve funding and authorizations for full-scale production, officials noted. L3Harris CEO Chris Kubasik said the department won’t take a board seat and will view it purely as a financial investment. 2
L3Harris plans to retain a controlling stake in Missile Solutions after the deal closes. The company expects the unit to gain from ongoing demand linked to programs like PAC-3, THAAD, Tomahawk, and Standard Missile. J.P. Morgan Securities is acting as its financial adviser, with Vinson & Elkins serving as legal counsel for the proposed transaction. 3
Defense News reported that L3Harris CFO Ken Bedingfield told investors the company’s sales could more than double by decade’s end. Bryan Clark, a senior fellow at the Hudson Institute, said the spin-off might revive a “pure-play” rocket-motor supplier and give the government a cleaner handle on the supply chain. But he also warned that demand swings could leave a standalone producer vulnerable. 4
The deal comes amid a tight market. Northrop Grumman remains another major U.S. rocket-motor maker, but TD Cowen analyst Gautam Khanna flagged that a government-backed competitor could put others at a disadvantage. Reuters noted the setup is unusual for defense, potentially raising concerns about conflicts of interest since the government would hold an equity-linked stake in a contractor bidding for federal contracts. 5
Traders will be eyeing the next session to see if cash continues flowing into defense supply-chain stocks or if interest drops after an initial surge. The real issue isn’t just valuation but whether Washington will repeat this playbook.
There’s plenty that could derail this. The deal hinges on a letter of intent and a set IPO schedule, while the Pentagon warns that multi-year procurement depends on Congress approving funds. Plus, rival contractors might fight back if they sense the odds aren’t even.
Inside L3Harris, the landscape is evolving. This month, the company restructured into three segments, elevating “Missile Solutions” to its own business line under Bedingfield’s leadership. 6
On Jan. 29, L3Harris will release its fourth-quarter 2025 results before the market opens, followed by an earnings call at 10:30 a.m. ET. This report will be a key moment to gauge how management addresses the IPO plan, capital requirements, and demand outlook. 7
