Initial public offerings (IPOs) are back and Wall Street couldn’t be happier. After the bear market of 2022, it took a while for privately held companies to pluck up the courage to return to the public markets to raise capital. But now the floodgates appear to be opening and some high-profile companies are lining up to take advantage of their chance to step into the IPO spotlight.
Arm stocks (POOR -4.60%) has already made a successful start as a listed company, but some believe that the IPO hype could give way to weaker stock performance for the semiconductor specialist. But much of the attention on Wall Street today is focused on grocery delivery service Instacart, which has priced its own IPO and is expected to begin trading sometime on Tuesday. Here you will find the latest information on both IPO stocks.
Instacart is pricing its IPO
Instacart continued to move forward with its IPO on Tuesday morning, announcing the final price for the shares it will offer to participants in the IPO. The stock closed at $30 per share, at the high end of the most recently expected range of $28 to $30 per share. This spread had increased over the course of the IPO process, reflecting fairly solid demand from investors.
However, many will view the IPO as anything but a major success for Instacart. The food delivery specialist raised money on the private market at valuations of up to $39 billion two years ago, when pandemic-related demand for its services was at its highest. In contrast, the $30 share price implies a valuation closer to $10 billion, giving venture capital investors a potentially painful exit.
Still, many market participants are pleased that Instacart will break the logjam of venture capital-backed companies seeking an IPO. In contrast, Arm Holdings was already wholly owned by Japan SoftBank Group, and therefore the dynamics of the IPO were slightly different. However, what the two offerings have in common is that only a relatively small portion of the outstanding shares will be available to the public at this time, which could potentially help support the share price.
Arm shares remain volatile
Shares of Arm Holdings were down about 5% at the open Tuesday morning. That followed a similar decline on Monday as investors tried to find balance after an impressive initial public offering by the semiconductor maker last week.
Arm’s IPO priced at $51 a share but immediately rebounded, climbing as high as $66 before closing at $63.59 on the first day. However, the stock has been on a downward trend since then, giving back more than half of its gains but still remaining above the official IPO price.
There is much debate about Arm’s potential. On the one hand, Arm plays a key role in the electronics industry, as its processing chips and architecture are found in many computers and mobile devices. Arm is also looking to capitalize on opportunities in data centers and edge computing, with high-performance technology that could help users adopt artificial intelligence and other innovative features.
Still, some investors wonder whether Arm will capture these high-growth markets or remain under pressure in industry niches with less potential for future expansion. Additionally, the valuation, which is quite high in some respects, leaves value investors unsure about the stock’s upside potential.
IPOs always attract a lot of attention, but can be challenging for investors who want to make informed decisions about their investments. Often it can be more convenient to let the initial dust settle than to spontaneously buy an IPO stock before you have all the information you want to know.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.