ARM, the British chipmaker, made its debut on the public markets on Thursday with a strong showing on the Nasdaq. The company’s shares opened at $56.10 and quickly jumped 10%, reaching over 20% in the first half-hour of trading. By the end of the day, the stock had closed up nearly 25%. Going into the initial public offering (IPO), shares were priced at $51 each.
ARM’s entry into the public markets is seen as a significant event for the US tech market, which has experienced a drought of IPOs in the past 18 months. Mark Roberts, the managing director of Blueshirt Group, described it as a “great first step” towards rejuvenating the market. The chipmaker’s IPO is also the most high-profile one that the Nasdaq has seen since the IPO boom in 2021, which subsequently turned into a bust in 2022.
Following the IPO boom and subsequent bust, the IPO market has been relatively quiet. However, it has slowly picked up momentum with the IPOs of beauty company Oddity and Mediterranean restaurant chain Cava over the summer. Arm’s successful IPO, along with the recent filings of Instacart and Klaviyo, indicates a potentially growing stream of IPOs.
Matt Maley, a strategist at Miller Tabak, emphasized the importance of Arm’s IPO, stating that its success could help revive a market that has been dormant for over a year. He also noted that it would provide insights into the AI sector, which has been surrounded by hype but lacking significant breakthroughs.
Despite the renewed activity in the IPO market, valuations remain a sticking point. Arm reportedly sought a valuation between $60 billion and $70 billion, while Instacart, valued at $39 billion in 2021, is now seeking a $9.3 billion valuation.
However, Arm’s IPO alone may not be sufficient to perceive a shift in the market. Gené Teare, a senior data editor at Crunchbase, stated that more companies need to go public to truly indicate a change. She described Arm as a unique company in the tech industry due to its role as a chip designer with prominent customers such as Apple. Greg Martin, the managing director of Rainmaker Securities, highlighted the company’s growth potential in the AI field.
Arm has experienced several transitions in recent years. In 2016, SoftBank acquired the company for around $30 billion, taking it private. In 2021, Nvidia attempted to acquire Arm in a deal that faced regulatory challenges and eventually failed after a year and a half. Arm has also been adjusting its revenue model by altering pricing and introducing a new customer licensing strategy, focusing more on AI.
The return of Arm to the public markets is viewed as a high-stakes moment. Its performance could have implications for the overall tech sector. If the IPO falls short, it may present problems for the sector, which has been trading in a sideways range for a few months. On the other hand, a successful IPO could provide a boost to the tech market.
Overall, Arm’s debut on the public markets signals a potential revival of the IPO market and offers insights into the AI sector. The chipmaker’s unique position and growth potential make it a crucial player in the tech industry.
More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )