Arm rings Nasdaq opening bell to mark stock market float Over in New York, executives from UK chip designer Arm have just rung the Nasdaq opening bell, to mark its stock market flotation. Cambridge-based Arm, owned by Japanese giant Softbank, is joining the US stock market with a valuation of around $52.3bn. Last night it priced its shares at the top of its expected range, $51 each, having seen strong interest from investors. This makes Arm’s float the biggest IPO of 2023 so far – in a year when flotations have been relatively rare, due to market volatility. Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says all eyes in the equities world are on Arm today as it goes public, adding: The company set its IPO price to $51 a share. It’s at the top end of the proposed price range, but still lower than the valuation of $64bn when Softbank bought out a stake from Vision Fund. Arm close 25% higher And finally…. Arm’s shares have closed tonight at $63.59, a gain of almost 25% on the $51 at which Softbank sold equity in its UK chip designer. That means Arm has ended its first day on the US stock market with a valuation of over $65bn. That may encourage further technology firms to float in the months ahead, after a fairly dry year for IPOs (especially in Britain). Thomas Hayes, chairman at Great Hill Capital LLC, says: “The game is back on. Capital markets are open for business. “You’re going to see so many IPOs in the next 12 weeks your head is going to spin.” With less than 90 minutes trading to go, Arm is on track for a positive first day on the US market: Full story: UK chip designer Arm soars on Nasdaq debut to notch $60bn valuation The British chip designer Arm looked set to be valued at more than $60bn as it debuted on the Nasdaq stock exchange in the biggest US share listing of the year. Arm set a price of $51 a share, valuing the company at $54.5bn on Wednesday. But as trading began on Thursday morning, investor appetite for the company’s initial public offering (IPO) pushed its share price up 10% to $56.10, valuing the company at just below $60bn. It later rose by as much as 20% up, before settling back at 17% up, giving a valuation of around $64bn. Founded in Cambridge in 1990 as Advanced Risc Machines, Arm supplies chipmakers with circuit designs and is the dominant supplier to the mobile phone market with its circuitry in 99% of smartphones. Japanese investment company SoftBank bought Arm for £24bn ($32bn) in 2016. Arm’s share price in early trading gave the company a market capitalisation of $63.6bn based on shares outstanding, or nearly $66.2bn on a fully diluted basis, the Financial Times reports. Wall Stret is rallying today, as investors take their lead from the gains in Europe earlier. The Dow Jones industrial average is currently up 319 points, or 0.9%, at 34,894 points, with traders also cheered by Arm’s IPO. George Sweeney DipFA, deputy editor at the personal finance comparison site, finder.com, reminds us that London missed out on the Arm IPO – with Softbank preferring to list in New York. Sweeney writes: A surprisingly strong start to trading for Arm has seen its share price break the $60 mark, substantially above what most analysts predicted. This could be partly due to the fact that the IPO became oversubscribed, providing leverage to demand a higher price. Even so, Owners of Arm (SoftBank) had been pushing for an even higher valuation after it paid $16bn to acquire 25% of Arm from one of its own venture capital funds, Vision Fund. Although this is an exciting opportunity to invest in a chipmaker in its early stages, it will be a tough challenge for Arm to grow and keep pace with the more well-established global players. As an example, Nvidia grew 127% in their first year of trading back in 1999 and is now a much larger business than Arm. Retail investors should also be alert to the risk of Arm’s stock price falling back after this initial flurry of interest. Amidst all the noise of this IPO, it’s worth remembering that listing on the FTSE could have been a logical move for the british-based firm and it would have been the one of the largest 14 constituents of the FTSE 100 based on its live market cap. Unfortunately, that wasn’t the case and is a reminder of the struggles that London is having post-Brexit. Today’s jump in Arm’s share price, currently up 18% at just over $60, lifts the company’s value to over $60bn. Here are the key points on today’s Arm stock market flotation, from Josh Warner, market analyst at City Index: The Arm IPO was priced at $51 per share, giving it a $54.5 billion valuation. Current owner Softbank has listed less than 10% of Arm’s float, and a large chunk of this is expected to have been snapped-up by major tech companies that are Arm customers. Based on its most recent annual earnings, Arm is coming to market with a valuation multiple of around 98x – three-times the average on the Nasdaq 100. Arm shares are rising in initial trade but are proving volatile. Arm is underpinning its valuation on new prospects stemming from a shift in strategy that will see it design more comprehensive, advanced and financially-rewarding chips rather than the business as it is today. Rising US-China tensions may cause concern for Arm as it threatens to disrupt its second largest market. Following a heavily oversubscribed IPO, ARM has started its first day of trading with a bang, says Ben Barringer, equity research analyst at Quilter Cheviot. This will delight Softbank, which still owns around 90% of Arm, and also the cornerstone investors from the big tech world who have backed the IPO. Barringer adds: “Now much of this is clearly hype and a bit of market froth, particularly as it has been starved of high profile IPOs in recent years. But with interest rates seeming to have peaked, growth companies are coming back into vogue at a time when artificial intelligence threatens to change the world as we know it. With only 10% of the company up for grabs in this IPO, pricing in the early stages will be quite volatile, so we won’t know the true value for some time. For example, ARM’s Q3 results won’t be until 14th November. However, investors, and especially those in big tech, clearly recognise ARM’s unique status. Its licensing and royalty business model gives it clear sight of its earnings and will sustain it even in difficult environments. Not only that, it has invested heavily and diversified its offering since being acquired by Softbank and has also continued to have an entrenched and dominant position in smartphone processors. Expectations are big for Arm, though, and growth is expected to accelerate quickly in 2024. Barringer explains: Margins could go as high as 60% in the long-term if it can continue to grow its market share, expand its offering and increases its royalty rates. “There are clearly risks around ARM China and the Softbank’s 90% stock overhang. However, this is a strong start and will be a key indicator for more tech firms looking to come to the public markets. ARM will be the story to watch for the rest of the year and beyond.” Arm’s shares are racing higher on the Nasdaq – they’re now up 20%, at over $61 per share. Arm shares jump 10% at the open Newsflash: shares in Arm have opened sharply above the chipmaker’s IPO price, as Wall Street traders scramble for a piece of the UK chipmaker. Reuters reports that Arm Holdings have opened at $56.10 each in its Nasdaq debut, a day after owner Softbank sold shares at $51 each. That’s an increase of 10% on the IPO price, which was itself at the top of Softbank’s range, and valued the company at over $52bn. Today’s opening price values Arm at $57.5bn, by my maths. This strong interest is partly because Softbank, which acquired Arm in 2016, is only floating around 10% of the business on the US stock market. My colleague Hibaq Farah writes: The chip designer predicts on its website that 70% of the world’s population use Arm-based technology. Without its designs, the iPhone and other smartphones would not work. The global chip powerhouse employs more than 5,000 people. Arm’s valuation is exceedingly high for a chip company when compared with other firms in its market, other than semiconductor-maker Nvidia, which is worth more than $1tn. A billboard at the Nasdaq stock market is showing information about Arm Holdings’ initial public offering today: FTSE 100 jumps 1.95%, best day of 2023 Newsflash: The UK’s blue-chip stock index has just posted its best day of the year so far. The FTSE 100 index has closed 147 points higher at 7673 points, a gain of 1.95%. That’s its biggest percentage jump since last November, and takes the Footsie to its highest closing level since the start of August. The rally was led by mining companies such as Anglo American (+7.7%), Rio Tinto (+4.7%) and Glencore (+4.3%). Shares soared today after China’s central bank cut the amount of cash that Chinese banks must hold as reserves, in an attempt to stimulate lending and support economic growth. Investors were also cheered by hopes that the European Central Bank may have finished raising eurozone interest rates, following today’s hike. Arm’s flotation (once its shares actually start trading…) will set the tone on Wall Street, points out New York Times writer Erin Griffith: