The designs created by this company can be found in almost every smartphone, and now its shares are listed on New York’s Nasdaq stock exchange. One of the most eagerly awaited events in the financial markets this year was undoubtedly the debut of Arm, and it did not disappoint. Let's take a closer look at the specifics.
Arm made a significant impact with its strong start, becoming the biggest initial public offering of the year – and the largest since Rivian, a startup that makes electric trucks, raised $14 billion in November 2021. After that, there was a notable shortage of new listings, but it's safe to say that this drought has come to an end.
The IPO marked Arm's return to the public market, occurring seven years after SoftBank took the company private, holding onto approximately 90% of its shares. It also comes around 18 months after the planned $40 billion sale to the prominent chipmaker Nvidia fell through due to antitrust concerns.
Arm's stock shot up by 10% when it entered the public market on Thursday. The excitement surrounding the company's growth potential, along with high expectations in the field of chip design for AI, pushed Arm's shares up by 25%.
They closed the first day of trading at $63.59, up from the IPO price of $51 per share. This resulted in a market value of $65 billion, surpassing SoftBank's acquisition price of $31 billion in 2016, Nvidia's $40 billion offer in 2020.
The SoftBank-backed company provides chip designs used in just about every smartphone. While many Americans likely haven’t heard of Arm, most use the company’s products daily. Apple (AAPL), Samsung, Nvidia (NVDA) and Google (GOOGL) use Arm’s designs and instructions to create their chips. In essence, what Arm does is come up with designs that are later handed to someone else to do the building, making Arm a capital-light business.
Dealmaking has sunk to its lowest levels in over a decade as recessionary fears and high interest rates have shrunk valuations. Wall Street views Arm’s listing as an example that may encourage further firms to float in the months ahead, after a fairly dry year for IPOs (especially in Britain). Arm’s spectacular performance indicated that the IPO market may finally be coming out of its two-year slump. Let's wait and see.
