The wait is over for investors – Arm has locked in its final pricing for its market debut, which begins trading on Thursday, September 14.
On the eve of the deal, the chip design firm priced its initial public offering at $51 a share.
The company is due to list at least 95.5 million American depository shares on the Nasdaq, although owner SoftBank will keep control of around 90% of its outstanding shares.
This will put Arm’s valuation at over the $54 billion mark (once its outstanding restricted stock units are accounted for), making it the biggest IPO of the year.
Arm has been teasing Wall Street with a string of deal tweaks in the lead-up to its launch. The firm lodged an updated F1/A filing with the Securities and Exchange Commission (SEC) on September 5, which set its target price range between $47 and $51.
Then, on Sunday, September 10, the firm suggested it may notch up its valuation further by edging its stock price still higher. This news came after sources leaked to the press last Friday that its stock was already six times oversubscribed (meaning investors demand exceeds the number of shares available six times over).
Yet in the end, Arm has pulled back from going up and over the edge, instead locking in the maximum price point from its earlier price range.
Demand for semiconductors that power AI applications is soaring as the technology advances at break-neck speed. As capital pours into the ecosystem, companies like Nvidia and Microsoft have become the driving force behind this year’s bull run.
Arm’s intellectual property underlies a large swathe of the global digital ecosystem, and it supplies core technology to leading brands, including Apple, Nvidia, and many others. To anchor its deal, Arm has gathered a long line of industry heavyweights to act as strategic investors, including Apple, Nvidia, Intel, Samsung, and others.
On Tuesday, September 12, the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Corporation (TSMC), announced it would invest up to $100 million in the Arms deal. Its CEO, Mark Liu, said “We want it to be successful, we want it to be healthy. That’s the bottom line.”
At Arm’s Length?
This may be a big moment for the industry and could shift the mood on Wall Street. However, some pundits have warned retail investors about rushing to grab Arm with both hands.
CNBC’s Deirdre Bosa warns of the dangers of the “IPO pop,” pointing out that returns on buying on the first day have typically been miserable.
“A lot of retail investors they want to get into some of these blockbuster names,” she said on the eve of the deal. “But if we look at history, blockbuster IPOs and the hype and excitement around them usually doesn’t pay off,” she said, mentioning Snowflake, Doordash, Airbnb, Rivian, and others that have debuted in recent years.
Bosa warned that the ten largest US IPOs of the past four years have resulted in an average loss of 47% when bought at the first day’s price.
As Arm debuts, Wall Street will be all eyes to see whether this could lift the momentum for the IPO calendar for the rest of 2023 and into next year.