• The stock soared for a second straight day, even though the unprofitable drone maker's IPO priced well below the expected range

Airo Group Holdings Inc.'s stock soared again Monday, to more than triple the price of the drone maker's initial public offering, in what one analyst has described as unusual given the lack of institutional demand.

Airo's $(AIRO)$ initial public offering had priced last week at $10 a share, which was well below the estimated range of $14 to $16 a share, suggesting demand was quite a bit less than expected.

Such a dramatic drop in the expected pricing would usually signal a weak performance from the shares when they started trading. But Airo's stock closed Friday at $24, or 140% above the IPO price. And on Monday, it was running up another 29% to $31, or 210% above the IPO price.

"It's unusual to see a company price below its indicated range and then pop 140% [on its first day] - that can indicate a lot of retail demand," Renaissance Capital analyst Matthew Kennedy said in an email to MarketWatch. "And indeed, individual investors have a history of betting on smaller, unprofitable companies, particularly those developing advanced technology."

Airo's IPO raised $60 million by selling six million shares in the IPO, through bankers Cantor Fitzgerald, BTIG, Mizuho and Bancroft Capital.

It started trading on Friday, a day when defense stocks rose on the heels of Israel's move to bomb Iran to damage its nuclear weapons program, despite weakness in the broader stock market.

What may have fueled the demand from retail investors was the signing of an executive order by President Donald Trump earlier in the month, titled "Unleashing American Drone Dominance," that aims to ramp up U.S. production of drones and expand the export of American-made drones.

One reason for the lack of demand from institutional investors could be the fact that they have been more keen on IPOs from profitable companies, while Airo still loses money.

For example, Chime Financial Inc.'s $(CHYM)$ IPO priced above its expected range, as did Circle Internet Group Inc.'s $(CRCL)$ IPO. Shares of both profitable companies soared on the day they debuted.

In the case of Airo Holdings, the company reported a first-quarter net loss of $1.97 million on $11.8 million in revenue, compared with a year-ago loss of $2.01 million on revenue of $13.74 million.

While Airo hasn't turned a profit, Renaissance Capital's Kennedy said the 101% increase in annual revenue, to $86.9 million in 2024 from $43.3 million in 2023, means the company offers investors a "real business."

"The success of Ukraine's recent attack on Russian airfields using drones has made a strong case for this company's products," Kennedy said. "The escalating conflict in the Middle East may also fuel future demand. It's grim to say, but stocks like this tend to benefit from global conflict."

Increased military spending around the globe was cited in Airo's IPO prospectus as a tailwind for the company.

Airo was originally expected to go public several months ago, but the IPO was postponed during the April stock-market swoon following Trump's "liberation day" tariff announcement. But following the apparent investor demand for recent IPOs, Airo popped back on the deal calendar again for last week.