British chip designer Arm made its Nasdaq debut on 14 September 2023 at $51 a share and closed its first day at $63.59. How the year’s biggest US IPO unfolded.
Arm Holdings, the British company that designs the processors found in the vast majority of the world’s mobile phones, made its debut on Thursday 14 September 2023 on the Nasdaq Global Select Market under the symbol ARM. It priced its offering at $51 a share, the top of the $47 to $51 range it had set, and the deal valued the company at around $54.5 billion.
The deal
It offered 95.5 million shares, in the form of ADSs (certificates each representing one share), worth $4.87 billion, making it the biggest US IPO of 2023 and the biggest since Rivian’s in November 2021. All the shares were sold by a SoftBank subsidiary; Arm received no money and SoftBank keeps around 90.6% of the company. The underwriters can buy up to 7 million additional shares in the following 30 days. Barclays, Goldman Sachs, J.P. Morgan and Mizuho led the deal.
SoftBank bought Arm in 2016 for $32 billion. In 2020 it agreed to sell it to Nvidia for $40 billion, but the deal was abandoned in February 2022 because of regulatory obstacles. In August 2023 SoftBank bought the 25% it did not already own, held by its Vision Fund, at a valuation of $64 billion. The British government had tried to secure a London listing, but Nasdaq won out.
The first day
The stock opened at $56.10 and closed at $63.59, 24.7% above the offer price, giving the company a market value of around $65 billion. The offering was comfortably covered: according to the chief financial officer, there was more demand than shares, and the company met 45 investors during the roadshow.
Arm designs processors and licenses them to manufacturers, collecting a royalty on each chip. According to Reuters, it earns a 5% royalty on chips built with its latest technology, against 3% for the previous generation, and its annual revenue fell 1% in the latest financial year. Its two biggest markets are phones and personal computers.
What to bear in mind
A good first day does not guarantee what comes next: a Reuters analysis noted that the ten biggest US IPOs of the past four years were trading, on average, 47% below their first-day close. Fortune cited the case of Rivian, which also rose sharply on its debut. Analysts saw Arm’s debut as a sign that the IPO market, frozen by the war in Ukraine and the Federal Reserve’s rate rises, might be reopening; Instacart, Birkenstock and Klaviyo were preparing their own listings for the following weeks.
For anyone with exposure to Arm, directly or through funds, the prospectus filed with the US regulator is the basic source on its risks and on the weight of SoftBank, which still owns around 90% of the capital. Ask your adviser how this fits your case.
An IPO is measured in years, not in a single session.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
