Arm’s successful debut may signal an end to the IPO drought
Pop! Few events in financial markets this year were as hotly anticipated as the listing on September 14th of Arm, a British chipmaker whose designs are found in nearly every smartphone. The debut, on New York’s Nasdaq stock exchange, was a resounding success. The share price climbed by 25% on the first day of trading, giving the firm a market value of $65bn. That is $34bn more than SoftBank, a Japanese investment group, paid for the firm in 2016, $25bn more than Nvidia, an American chipmaker, offered to pay in 2020, $1bn more than the valuation at which SoftBank shuffled a 25% stake from its investment fund to its main operation in August, and 125 times Arm’s profit last year.
Arm’s initial public offering (IPO) is America’s biggest since Rivian, a startup that makes electric trucks, raised $14bn in November 2021. New listings dried up shortly thereafter. Many have been counting on Arm to break the spell. Its successful opening day will lift the spirits of Birkenstock, a German sandal-maker which on September 12th announced plans to list its shares in America, and Instacart, a grocery-delivery firm looking to raise $600m this month.
Some investors had feared that Arm might flop, which is understandable, given how devilishly difficult the firm is to value. Arm’s bosses and bankers have convinced investors that it can juice the royalties its customers pay to use its designs, offsetting the effect of the worldwide slump in smartphone sales currently under way. Arm’s new shareholders appear to have also shrugged off two wider worries confronting markets: the risk of doing business in China, and the excesses of investor enthusiasm for all things artificial intelligence (AI).
2023-09-14 15:57:02
Post from www.economist.com
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