British chipmaker Arm made its debut on the public markets on Thursday, with its shares opening at $56.10 in afternoon trading. The stock quickly jumped 10% and climbed over 20% to above $61 in the first 30 minutes of trading. Prior to the initial public offering (IPO), shares were priced at $51 each. The company’s market cap began at $54.5 billion but has since exceeded $60 billion.
Arm’s IPO is the most high-profile offering that the Nasdaq has seen since the IPO boom of 2021, which subsequently experienced a downturn in 2022. Since then, the IPO market has been relatively quiet, with only a few companies going public, such as beauty company Oddity and restaurant chain Cava. However, the recent IPO filings of Instacart and Klaviyo have indicated a resurgence in the market.
Matt Maley, a strategist at Miller Tabak, believes Arm’s IPO could have a significant impact on the market. He stated, “If [Arm] does well, that’s certainly going to help open up things for a market that’s been dormant for over a year now. It’s also going to tell us something about this whole thing with AI. There’s still plenty of hype surrounding it but not the big euphoria.”
While the IPO market appears to be heating up again, the valuations of these companies have become a point of contention. Arm reportedly aimed for a valuation between $60 billion and $70 billion, while Instacart, previously valued at $39 billion, is now seeking a valuation of $9.3 billion.
As a chip designer, Arm stands out among tech companies due to its prominent customers, including Apple. Greg Martin, managing director at Rainmaker Securities, described Arm as a “one-of-one company” with tremendous growth potential in the field of artificial intelligence (AI). However, he noted the need for caution, given the company’s previous lack of growth and the competitive landscape.
Arm has undergone significant transitions in recent years. In 2016, the company was acquired by SoftBank and taken private for around $30 billion. In 2021, Nvidia attempted to acquire Arm, but the deal faced regulatory hurdles and eventually fell through. Arm has also adjusted its revenue model, focusing more on AI and altering pricing and customer licensing strategies.
The success of Arm’s return to the public markets is crucial for the tech sector as a whole. Maley suggests that if the IPO underperforms, it could pose problems for the industry. Conversely, a strong performance could provide a much-needed boost to a sector that has been trading sideways for months.
It is important to note that this story is still developing, and further updates may follow.
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More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )