Rheinmetall shares tumbled as much as 16% in European trading after reports surfaced that Germany plans to scrap its F126 frigate program. The potential cancellation of six new warships represents one of the company's largest defense contracts and a significant blow to its order book. Trading volumes surged as investors digested the news.

The stock's decline accelerated losses that have already erased roughly one third of Rheinmetall's value this year. Meanwhile, shares of TKMS jumped nearly 10% on speculation the company could benefit from alternative naval projects. The rival shipbuilder's year-to-date gains now exceed 20%.

Der Spiegel and the Financial Times reported the German government's decision, though neither the defense ministry nor Rheinmetall has confirmed the move. The F126 frigate project would have marked the largest naval shipbuilding program in Germany's history. The potential shift signals changing defense priorities amid evolving security threats in Europe.

For investors, the news highlights risks in defense contracting where government policy changes can dramatically impact valuations. Rheinmetall now faces the challenge of replacing lost revenue while the German defense market reevaluates its naval strategy.