Brendan McDermid/Reuters
Arm CEO Rene Haas and executives cheer as Arm, a chip design company owned by Softbank, holds an initial public offering on September 14, 2023.
new York
CNN
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The largest public offering since 2021 is here.
After a nearly two-year dry spell in the IPO market, U.K.-based chip designer Arm had a successful Nasdaq debut on Thursday, ending the day up 25% and giving the company a market capitalization of about $65 billion.
The company began trading in New York on Thursday afternoon with 95.5 million shares under the ticker symbol “ARM” (ARM). Trading began at $56 per share – already 10% above the original offering price – and closed at $63.59.
The strong opening marks the biggest IPO this year – and the biggest since electric truck maker Rivian in 2021.
The Dow gained more than 330 points on Thursday, posting its best day since August, as investors cheered the news.
SoftBank, which acquired Arm in 2016 for $32 billion, will retain about 90% of the company’s shares.
While many Americans have probably never heard of Arm, most use the company’s products every day. Apple (AAPL), Samsung, Nvidia (NVDA) and Google use Arm’s designs and instructions to make their chips. The company is heavily involved in the manufacturing of smartphones, laptops, video games, televisions and GPS devices.
According to a filing last week, companies including Apple, Google, Nvidia, AMD, Samsung and TSMC have expressed interest in serving as lead investors in the offering.
“We’re very pleased with today,” Arm CEO Rene Haas told CNN’s Richard Quest on Thursday afternoon. “It’s a great day for the company… Our bankers say if you can price it at the top end of the range and exceed that, that’s a good thing. That’s where we ended up and we couldn’t be happier.”
Dealmaking has fallen to its lowest level in more than a decade as recession fears and high interest rates caused valuations to shrink. Wall Street views Arm’s listing as a weather balloon for a number of technology companies waiting to go public.
Goldman Sachs (GS) reported this summer that its investment banking revenue fell 20% in the second quarter of 2023. Overall, profit for the quarter fell 58% year over year to $1.2 billion.
“Activity levels in many areas of investment banking are near multi-decade lows, and clients remained largely risk averse during the quarter,” Goldman Sachs CEO David Solomon said in a recent earnings call. This means that customers are afraid to place bets in an uncertain economic environment.
But experts say there are plenty of healthy companies waiting to go public — they just don’t want to be the first to go public.
A successful debut from Arm could be the big IPO that clears the pipeline for the rest.
“This is a big deal,” said Dave Sekera, chief U.S. market strategist at Morningstar Research Services. “The big advantage for investors, including in the public markets, is that a successful IPO opens the door for a wave of new IPOs. This would create positive market sentiment for the entire stock market.”
Goldman Sachs is the lead underwriter for the IPO. The bank’s shares closed about 2.9% higher on Thursday.
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