SoftBank’s Arm Skyrockets: 25% Surge to $65B on Debut

After a nearly two-year lull in the IPO market, UK-based chip designer Arm made a triumphant Nasdaq debut, achieving a 25% surge and settling the company at a market cap of around $65 billion. This marks the largest initial public offering this year and the biggest since Rivian’s debut in 2021.

A Strong Opening

Arm began trading in New York on Thursday afternoon under the ticker ‘ARM’ with 95.5 million shares. The company opened trading at $56 per share, a 10% increase over its initial price offering, and closed at $63.59.

Arm’s successful debut has rejuvenated the IPO market, which had languished due to geopolitical tensions and higher interest rates. The company’s strong performance indicates that investor demand for initial public offerings may be on the rebound.

SoftBank Holds Majority Stake

SoftBank, which acquired Arm for $32 billion in 2016, retains about 90% of the company’s shares. Despite the impressive debut, Arm’s opening marks a climb-down from the $64 billion it was valued at last month when SoftBank purchased the 25% stake of Arm it did not directly own from its Vision Fund unit. However, Arm’s Chief Financial Officer Jason Child revealed that SoftBank CEO Masayoshi Son remains optimistic about the company’s future.

Arm’s Impact on the Tech Industry

Arm is a key player in the tech industry. Tech giants like Apple, Samsung, Nvidia and Google use Arm’s designs and instructions to create their chips. Arm’s technology is crucial in the production of smartphones, laptops, video games, televisions and GPS units.

Several of these companies, including Apple, Google, Nvidia, AMD, Samsung and TSMC, have shown interest in acting as cornerstone investors in the offering.

Repercussions for the IPO Market

Arm’s successful debut is viewed by Wall Street as an indicator for a number of tech companies waiting in the wings to go public. If Arm’s IPO proves successful, it could potentially open the floodgates for a wave of new IPOs, providing a positive market sentiment for the overall stock market.

Goldman Sachs, the lead underwriter in the IPO, saw its shares close about 2.9% higher on Thursday. The company’s debut may also boost Nasdaq’s future revenue growth, as large deals like Arm’s provide the exchange with short-term publicity and a long-term bet to increase recurring revenue from annual listing fees.

The Way Forward

Arm’s strong debut is expected to have a positive impact on the IPO pipeline, revitalizing the AI theme which remains a key area of investor interest. Several companies are slated to go public in the coming weeks, including grocery delivery service Instacart, German footwear maker Birkenstock, and marketing automation platform Klaviyo. If these IPOs succeed, they are likely to trigger a wave of stock market launches in 2024.

Despite the optimism, some experts warn that the market will not return to the frothy conditions of 2021. Certain sectors, such as biotech, are expected to remain dormant until interest rates begin to fall, making stocks more appealing compared to bonds.

In conclusion, Arm’s successful debut in the IPO market could be the catalyst for a new wave of tech companies going public, potentially providing a much-needed boost to the global IPO market.


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