The year’s most hotly anticipated initial public offering (IPO) in tech opened at the starting bell this morning, with ARM Holdings’ (ARM) stock beginning the day on Nasdaq at $51 per share. That’s the cost per share for the 10% of the company (95.5 million shares) Softbank is putting up for auction so far, aiming for a roughly $54 billion valuation on the stock.
This is actually Arm’s second IPO on Nasdaq. It was listed from 1998 until Softbank acquired it in 2016. “We are elated to welcome Arm back on Nasdaq,” said Karen Snow, Nasdaq’s global head of listings.
For investors, the big issue is future revenues, cash flow, and profits. With that in mind, news of Apple’s pre-IPO licensing agreement with Arm might provide some reassurance — as might the existence of a cross-industry consortium of big tech firms taking large stakes in the stock before it hit market.
(Apple, Alphabet, Samsung, Microsoft, TSMC, Intel, and Nvidia all took out anchor investment positions. An anchor investor is an institutional investor who acquires a large number of shares in a company at an agreed, fixed price before the IPO takes place. This helps maintain value and create stability in the shares, while also giving those investors some negotiation power.)
TSMC Chairman Mark Liu said of his company’s $100 million investment: “Arm is an important element of our ecosystem, our technology and our customers’ ecosystem. We want it to be successful, we want it to be healthy. That’s the bottom line.”
Analyzing company health
Before the IPO, Arm shared extensive information about its own financial health. This showed 2021 revenue of $2.7 billion and confirmed earnings that have grown at 16.2% CAGR across the last three years. It also revealed an average gross margin of 95%. The headline data doesn’t account for revenue costs, such as R&D, staffing and the cost of doing business, but the margins are impressively high. The balance sheet is strong, and Arm claims 70% of the global population already use products containing its technologies.
Why the Arm IPO matters
Arm’s chip designs are widely used across the industry, with Apple’s Macs and iPhones exemplifying the importance of what the Cambridge, UK-based company creates. The “jewel in the crown” of UK technology before its $32 billion purchase by Softbank in 2016, investors are hoping Arm will turn that accelerating adoption into profits in roughly the same range (albeit at smaller scale) as those generated by Nvidia.
That’s what they’ll be looking for, and also what the closing bell stock price will reflect. As of early afternoon in the US, the stock’s share price high was $61.99, the low was $55.54
Meanwhile, current UK Prime Minister Rishi Sunak will be licking his wounds, having failed to convince Softbank to list Arm’s stock on the UK market, in part because Brexit has badly hurt the UK economy.
In the background
Softbank’s IPO for Arm Holdings…
2023-09-15 17:00:04
Source from www.computerworld.com rnrn