In a highly anticipated stock-market debut, shares of British chip designer Arm soared 24.69% on Thursday, signaling a resurgence in the IPO market after prolonged stagnation over the past two years.
The stock closed at $63.59, a remarkable 25% increase from its initial public offering (IPO) price of $51. This impressive market response to the year’s most extensive offering will likely provide relief to investors, companies gearing up to go public, and Wall Street firms benefitting from underwriting IPOs.
The disappointing performance of IPOs in 2020 and 2021 had left many investors wary, with most offerings from that period still trading below their debut prices. Arm’s impressive first-day surge is a positive sign for upcoming IPOs, particularly for Instacart and Klaviyo, preparing for stock offerings next week.
Recent months have shown signs of life in the IPO market, with companies like Cava Group and Oddity Tech experiencing successful offerings, albeit with some subsequent stock price fluctuations, underscoring the market’s fragile nature.
Arm’s successful IPO is a triumph for SoftBank Group, the company’s owner. It has significantly increased Arm’s valuation to nearly $69 billion on a fully diluted basis—more than double the roughly $32 billion SoftBank paid to acquire it in 2016.
This surge in valuation is also well above the $64 billion implied by SoftBank’s recent acquisition of a 25% Arm stake.
SoftBank, the seller of 10% of its Arm shares in the IPO, aims to capitalize on future gains if the stock price appreciates further over time, contributing to funding SoftBank CEO Masayoshi Son’s planned tech startup investments.
Chip companies are experiencing a notable year, with a 40% rise in the PHLX Semiconductor Index driven by the artificial intelligence boom, with Nvidia’s value tripling this year, surpassing $1 trillion.
Although Arm doesn’t manufacture chips, it provides crucial circuit designs in over 99% of smartphones, aiming to expand revenue streams across various automotive and cloud computing industries.
Arm’s IPO comes at a time when chip companies are gaining increased attention due to the critical role their products play in national security. The U.S. has taken steps to restrict China’s access to advanced chips to mitigate potential security risks, underscoring the strategic importance of chip companies like Arm.
Arm’s listing on the Nasdaq under the symbol “ARM” brought a touch of Britain to the stock exchange, showcasing “The Builton Arms” Pub in Times Square—a playful nod to its slogan, “The Future is Built On Arm”—where fish and chips were served, blending elements of British culture with the excitement of its stock market debut.