November 14, 2017 / 4:02 PM / in a year

UPDATE 1-Israeli police investigate drone maker Aeronautics, shares tumble

(Recasts with police statement, adds Aeronautics/CEO comment, share price fall)

By Steven Scheer

JERUSALEM, Nov 14 (Reuters) - Israeli police said on Tuesday they are investigating Aeronautics over a deal involving the drone maker, sending its shares tumbling as much as 30 percent.

“An investigation is being conducted against Aeronautics Defense Systems Ltd in connection with a deal with a significant customer,” the police said in a statement.

An Israeli court has issued a gag order on publication of details of the investigation and identifying the suspects.

Aeronautics, which develops, manufactures and markets unmanned aerial vehicles for military uses, said in a statement on Tuesday it is “cooperating fully with the investigation” and that would do its utmost to ensure the investigation will be as short as possible.

Its shares, which were halted for the first three hours of trading in Tel Aviv, fell as much as 30 percent when they reopened and closed 21 percent lower on the news.

In August, Aeronautics reported that the Defence Ministry had suspended the marketing and export licence for one of the firm’s attack drones to a single, significant customer in a foreign country. The contract was for $20 million.

Israel’s Maariv newspaper at the time reported that the ministry had opened an investigation into Aeronautics over whether during a July demonstration in Azerbaijan one of its drones was used to attack a military position in the neighbouring country of Armenia, and if so, who was at fault.

Aeronautics — which has sold many UAV systems to Azerbaijan — has denied it was at fault, saying in a statement in August: “Aeronautics has never carried out demonstrations on live targets, and that was true in this case as well.”

Despite the gag order, Israeli and other media outlets on Tuesday widely reported what had occurred in Azerbaijan in July.

Aeronautics’ Chief Executive Amos Mathan declined to answer questions on the investigation or whether it was linked to Azerbaijan during a conference call with analysts on Tuesday.

Mathan said business was as proceeding as usual globally and that he would share more details when he was able to do so. (Reporting by Steven Scheer; editing by Alexander Smith)

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