Arm's shares are rising as Wall Street expects the IPO ban to expire

By Chibuike Oguh

NEW YORK (Reuters) – Shares of Arm Holdings, the British chip developer backed by Softbank Group, rose 2.1% to $129.50 on Tuesday as markets rallied following the expiration of its lock-up period prepared for increased trading activity in connection with its blockbuster initial public offering (IPO).

Most initial public offerings include a lock-up period of up to six months during which company insiders and pre-IPO investors are prohibited from selling their shares. This typically limits the number of shares available for public trading.

With only 9.5% of Arm's outstanding shares available for trading since its September IPO, Tuesday's lock-up expiration is expected to give more investors the opportunity to unload some of their holdings. Softbank owns a 90% stake, or about 930 million shares, in Arm, according to LSEG data.

Arm shares' trading volume on Tuesday was about 18.1 million shares, compared with the stock's 25-day moving average volume of about 28.5 million shares, according to LSEG data. Such a small inventory of stocks available for trading can lead to large fluctuations.

Shares of Arm have risen 68% since the company reported quarterly results in February that beat analysts' expectations, driven by increased demand for chip designs specifically tailored to artificial intelligence data processing.

“The lock-up period appears to have weighed on shares leading up to its expiration, but was not enough to bring shares below their February lead,” said Michael Ashley Schulman, chief investment officer at Running Point Capital, in an emailed statement Statement sent to Reuters.

“The big unknown factor concerns SoftBank's intentions regarding the 90% of the chip company it still owns,” he added.

Several major Arm customers, including Nvidia, Alphabet's Google and Intel, also hold small stakes in the chip designer. Taiwan Semiconductor Manufacturing Co (TSMC) announced the sale of 850,000 shares of Arm in February.

(Reporting by Chibuike Oguh in New York; Editing by Alden Bentley, Lance Tupper, Will Dunham and Jonathan Oatis)