Germany Seeks to Ease Lawmakers’ Fears of Thiel Drone Firm Stake

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(Bloomberg) — Germany is looking to dispel concerns that its planned €3 billion ($3.5 billion) order for attack drones from a Peter Thiel-backed defense start-up could pose a security threat due to the role of the controversial US investor.

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The defense ministry told lawmakers in a confidential briefing on Thursday that Thiel is only one of many minority shareholders at Stark Defense through his investment company Thiel Capital, according to people familiar with the discussion. 

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Berlin-based Stark is majority-owned by its founding team and employees, with the remaining shares distributed among about 50 different shareholders.

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Lawmakers were told that Thiel’s stake remains below 10%, that he’s not a member of the supervisory board, and that there are no control or other special rights that give him insight into or influence over the operational management of the company. 

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No shareholder, including Thiel, has access to Stark’s technology or influence over its research and development decisions, the lawmakers were told. 

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For the intended conclusion of the contract, confidentiality clauses ensure that only the personnel involved in the implementation within the company will have access to confidential information, it was said.

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If Thiel’s potential stake were to exceed the 10% threshold, though, it would trigger an investment review by the economy and energy ministry in Berlin and give the German government the option of blocking the higher stake at any time, the defense ministry told lawmakers.

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A Stark spokeswoman said the information provided by the defense ministry about Thiel’s role and influence at Stark Defense were accurate. She added she was not aware of any plans that Thiel might increase his stake.

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The German defense ministry declined to comment. A Thiel spokesperson didn’t immediately reply to a written request for comment outside European business hours.

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German lawmakers are set to approve two military procurement orders for loitering munition systems (LMS), also known as attack or kamikaze drones, during a closed-door meeting on Feb. 25, according to people familiar with the matter.

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Stark will get a first tranche of roughly €270 million from an overall contract of €2.9 billion, and competing start-up Helsing will get the same amount from an overall contract of €1.5 billion, the people said.

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The Virtus system from Stark is capable of vertical take-off and landing, meaning it can take off and land independently without a launch device and can therefore be used multiple times, lawmakers were told.

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The HX-2 system from Helsing doesn’t have those capabilities and requires a catapult for launch, it was said. In addition, Helsing is already selling its HX-2 to numerous other countries so the costs for development and the establishment of resilient production capacities are spread across a larger number of customers.