After a nearly two-year drought in the IPO market, British chip designer Arm made a successful debut on the Nasdaq on Thursday, ending the day up 25% and giving the company a market capitalisation of around $65 billion.
The company began trading in New York on Thursday afternoon with 95.5 million shares under the ticker ‘ARM’ (ARM). Trading opened at $56 per share – already 10% above the initial offering price – and closed at $63.59.
The strong open marks the largest IPO this year – and the biggest since electric truck maker Rivian in 2021.
The Dow rose more than 330 points on Thursday, its best day since August, as investors cheered the news.
SoftBank, which bought Arm for $32 billion in 2016, will retain about 90 per cent of the company’s shares.
While many Americans probably haven’t heard of Arm, most use the company’s products every day. Apple (AAPL), Samsung, Nvidia (NVDA) and Google use Arm’s designs and instructions to make their chips. The company is essential to the production of smartphones, laptops, video games, televisions and GPS devices.
Companies including Apple, Google, Nvidia, AMD, Samsung and TSMC have expressed interest in acting as cornerstone investors in the offering, according to a filing last week.
“We’re very excited about today,” Arm CEO Rene Haas told CNN’s Richard Quest on Thursday afternoon. “It’s a great day for the company… Our bankers say if you can price at the high end of the range and come out of that number, that’s a good thing. That’s where we ended up and we couldn’t be happier”.
Opening the pipeline
Dealmaking has fallen to its lowest level in more than a decade as recession fears and high interest rates have squeezed valuations. Wall Street sees Arm’s listing as a weather balloon for a number of tech companies waiting to go public.
Goldman Sachs (GS) reported this summer that its investment banking revenue fell 20% in the second quarter of 2023. Overall, profits in the quarter fell by 58% year-on-year to $1.2bn.
“Activity levels in many areas of investment banking are near multi-decade lows, and clients largely maintained a risk-off posture during the quarter,” Goldman Sachs CEO David Solomon said on a recent earnings call. That means clients are worried about making bets in an uncertain economic environment.
But experts say there are plenty of healthy companies waiting to go public – they just don’t want to be the first ones out.
A successful Arm debut could be the big IPO that clears the pipeline for the rest.
“This is a big deal,” said Dave Sekera, chief US market strategist at Morningstar Research Services. “The big takeaway for investors, even in the public markets, is that if this IPO is successful, it opens the floodgates for a wave of new IPOs. That would be a positive sentiment for the broader equity market.”
Goldman Sachs is the lead underwriter for the IPO. The bank’s shares closed up around 2.9% on Thursday.
