Arm IPO Raises $4.87bn on Nasdaq

Yesterday we reported that UK chip design company Arm was valued at just above $50bn before going public on the Nasdaq stock exchange. At the end of the day, the share price had jumped by close to 25% above the debut price. It rose from $56.10 to $63.59 ÔÇö much higher than the $51 presented on Wednesday.

This made it the largest public listing in the US in nearly two years. The significant jump in share price could be attributed to the fact that the IPO was oversubscribed by up to 10 times. As a result, banks had closed their order books one day early on Tuesday.

Arm’s Unique Role in the Semiconductor Supply Chain

Arm is a chip design company that doesn’t produce or sell actual computer chips. Instead, it focuses on designing their blueprints and selling the intellectual property and instruction sets. This unique approach has given Arm a crucial position in the semiconductor supply chain. Notably, strategic investors in the IPO include some of Arm’s biggest customers such as Nvidia, Intel, Apple, Samsung, and TSMC.

The Success of SoftBank’s IPO Strategy

Before trading commenced, some bankers wanted to price the shares above the marketed range. However, SoftBank chairman and CEO Masayoshi Son held his ground, believing it wasn’t worth risking a healthy debut for a relatively small increase in proceeds. This strategy proved successful as Thursday’s IPO raised $4.87bn for SoftBank. SoftBank had initially acquired Arm for $32bn in 2016.

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Arm’s Growth Potential and Potential Concerns

After establishing itself as a crucial part of the smartphone value chain, Arm aims to expand its presence in the automotive, data center, and AI sectors. With the growing demand for chips in these markets, Arm sees significant growth opportunities. However, potential concerns arise from Arm’s dependence on China, which accounts for a quarter of its sales, and increasing trade tensions and export restrictions. Additionally, Arm will face challenges from the rising popularity of open-source instruction set architecture RISC-V.