Electro Optic Systems Holdings Ltd (ASX: EOS) shares crumbled today despite no news being released by the Australian technology company.
But let's put this into perspective. Up until today, the Electro Optic Systems share price has been skyrocketing. In fact, the shares are up by 39% in 30 days.
This mostly relates to a number of countries upping their defence spending in light of the Russia-Ukraine conflict. War is on the minds of ASX investors and space is the new defence frontier, it seems.
This has special relevance to Electro Optic Systems as it develops and produces electro-optic technologies for the aerospace market, including defence.
Australia investing $7 billion in space defence
Australia is ramping up its space defence spending, committing about $7 billion over the next 10 years to develop our space capabilities. This could spell good news for the Electro Optic Systems share price.
Yesterday, the Department of Defence announced the establishment of a Defence Space Command. It also released its Defence Space Strategy, which aims to secure Australia's access to space for civilian and military uses.
Defence Space Commander Air Vice-Marshal Cath Roberts said integrated space capabilities incorporating all arms of the Australian Defence Force were necessary in today's world.
In a report in The Guardian, Air Vice-Marshal Roberts said theoretically a Chinese satellite could take out Australia's national broadband network (NBN).
Roberts said: "The activities by China and Russia, which have been fairly well documented in the public domain, scare me. I think our lack of capability at the moment against those threats … that is concerning."
She further stated:
What we see from space gives us an unsurpassed advantage in surveillance and intelligence. It is central to how we will fight and win in the future across multi-domain operations, using advanced hypersonics, precision strike missiles and guided weapons. We are enhancing our sovereign capabilities so Australia can be self-reliant in the detection of threats and collection of information for the defence of our nation.
Electro Optic Systems derives most of its revenue from defence customers, particularly in North America. It develops and manufactures advanced fire control, surveillance, and weapon systems for approved military clients.
What's been happening at Electro Optic Systems lately?
Last week, Electro Optic Systems announced a strategic review to maximise shareholder value. The board reckons the company is undervalued given its exciting future prospects.
As my Fool colleague Aaron reported last week, management has been seeking funding options for its wholly-owned United States subsidiary, SpaceLink. This relates to the manufacture and launch of a constellation of medium earth orbit satellites to create a "communications superhighway for the space economy".
The company is also looking to turbocharge growth in its defence and space divisions.
Electro Optic Systems share price snapshot
The Electro Optic share price closed Thursday's session down 11.89% to $2.89. It is down almost 45% over the past 12 months but up 21% this year to date.
