Arm Holdings, the British chip designer owned by Japan’s SoftBank, made a remarkable return to the public markets as its shares surged by nearly 25 percent above their Nasdaq debut price on Thursday, Reuters news report said.
This strong performance has reignited investor optimism for initial public offerings (IPOs), which had faced challenges in recent years due to geopolitical tensions and rising interest rates.
Arm’s stock opened at $56.10 and closed at $63.59, marking a gain of 24.68 percent and giving the company a valuation of $65 billion. The IPO had been priced at $51.
This resurgence in Arm’s value suggests renewed investor demand for IPOs and demonstrates the vitality of the artificial intelligence (AI) theme in the market, according to industry experts.
Salman Malik, a partner at Anson Funds in Toronto, described Arm’s IPO as successful and noted its positive impact on the IPO pipeline. Several companies, including grocery delivery service Instacart, German footwear maker Birkenstock, and marketing automation platform Klaviyo, are scheduled to go public in the coming weeks. If these IPOs are successful, they may trigger a wave of stock market launches in 2024, as predicted by bankers and analysts.
Arm achieved a valuation of $54.5 billion after pricing its IPO at the top end of the marketed range. The IPO raised $4.87 billion for SoftBank, which still holds a 90.6 percent stake in the company. SoftBank initially took Arm private in 2016 for $32 billion and had attempted to sell it to chipmaker Nvidia in a $40 billion deal in 2020 but faced regulatory obstacles.
Arm’s return to public markets also faced challenges from the British government, which had advocated for the chip designer to list in London.
Despite the lower valuation compared to last month, SoftBank CEO Masayoshi Son remains enthusiastic about Arm’s future, according to Arm’s Chief Financial Officer Jason Child. Arm is a vital player in the tech hardware ecosystem, with its chip designs powering nearly every smartphone globally. The company recently disclosed a 1 percent drop in annual revenue due to slumps in its two largest markets: smartphones and personal computers.
Child highlighted Arm’s potential to boost sales, with a 5 percent royalty rate on chips made using the latest technology, compared to 3 percent with the previous version. Premium phones are more likely to use Arm’s advanced technology.
Some bankers involved in the IPO drew a valuation comparison with circuit designer Cadence Design Systems, noting that Cadence trades at 35 times 2025 earnings, while Arm, at $51 per share, trades at 29 times earnings.