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Shares in chip designer Arm jumped by as much as 20 per cent as it began trading on the Nasdaq exchange on Thursday, valuing the SoftBank-backed company at more than $60bn.
Arm opened at $56.10 per share on Thursday afternoon and climbed as high as $61.99 in early trading, significantly above the $51 offer price agreed on Wednesday evening.
The price in early trading gave the chipmaker a market capitalisation of $63.6bn based on shares outstanding, or nearly $66.2bn on a fully diluted basis.
The IPO raised almost $5bn for SoftBank, making it the largest US listing in almost two years.
Rene Haas, Arm’s chief executive, said discussions with investors during the IPO roadshow presented a chance to explain “just how different a company that we are today” since SoftBank acquired the Cambridge-based chip designer for $32bn in 2016.
“We are far more diversified,” he said, noting the company had shifted from earning about two-thirds of its revenues from mobile phone chips to less than half. “We did a lot of work in the years between 2016 and 2023 to transform the company.”
Despite selling around 10 per cent of Arm in the IPO, SoftBank has been a “net buyer” of the company’s shares, Haas said. SoftBank last month bought back the 25 per cent of Arm that it did not already own from Vision Fund, an investment firm managed by the Japanese conglomerate, in an internal transaction that valued the chip company at $64bn.
“[SoftBank chief executive Masayoshi Son] owns more of Arm today than he did a number of weeks ago, so that should tell you that he is very, very optimistic about the future,” said Haas.
“If you look at the fact that they have not sold very many shares, they’re going to be a big shareholder in Arm going forward, they are sharing the vision that I have that the best days for our company are ahead of us,” he added.
The strong reception to Arm’s listing will fuel confidence in the wider IPO market, which has been gradually reopening after one of the worst fundraising downturns in decades.
“Just because Arm can come and do a good IPO . . . does that mean everyone can do it? Probably not,” said one banker involved in the deal. “But are conditions improving? Yes.”
IPOs for grocery delivery app Instacart and marketing software group Klaviyo are expected to provide a further test of investor appetite next week.
A large first-day “pop” for a new listing can be disappointing for company executives and existing shareholders as it indicates that they could have raised more cash in the initial offering.
The $51 offer price was at the top of Arm’s announced price range. Bankers discussed pricing the deal even higher given the strong demand.
However, several people involved in the listing have said SoftBank and Son were most concerned with ensuring the stock trades well than maximising their initial payout.
“This is going to be their biggest asset going forward, so every decision they make should be around protecting the value of the 90 per cent [of Arm that SoftBank still owns], not optimising the value of the 10,” said one person who worked on the deal.
Barclays, Goldman Sachs, JPMorgan and Mizuho acted as lead bookrunners on the deal, with a further 24 banks working as underwriters.
Additional reporting by Ivan Levingston in London and Richard Waters in San Francisco
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