Arm Holdings' Triumphant Nasdaq Return: A Beacon of Hope for Future IPOs?

By David Love, Quiver Editor

Posted: 2 weeks ago // Sept. 14, 2023 6:19 p.m. UTC

In a remarkable return to the public market after a seven-year hiatus, Arm Holdings (ARM), a subsidiary of SoftBank, witnessed a soaring debut on Nasdaq (NDAQ), fetching a nearly $60 billion valuation. Opening at a buoyant 10% above their offer price, the shares manifested confidence, indicating a promising landscape for future IPOs. Analyst Owen Lau, from Oppenheimer, expressed optimism that this uptick might revitalize the IPO market, extending its vigor well into 2024. Furthermore, the industry is keenly observing the repercussions of Arm's listing, especially in anticipation of forthcoming high-profile listings of notable startups such as Instacart and Klaviyo.

Despite the stirring debut, it wasn't all smooth sailing for Arm Holdings, which faced several obstacles on its way to the IPO, including interventions from the British government advocating for a London listing. Initially acquired by SoftBank in 2016 for $32 billion, a proposed $40 billion deal with chipmaker Nvidia (NVDA) had to be shelved due to regulatory impediments. This series of events compelled SoftBank, which retains a significant 90.6% stake post-IPO, to gravitate towards the current IPO route. SoftBank CEO, Masayoshi Son, remains bullish about Arm's prospects, emphasizing a long-term vision over immediate stock performance, according to CFO Jason Child.

Arm's financial trajectory has experienced slight fluctuations, reporting a 1% dip in annual revenue last month. Nevertheless, the company is gearing up to escalate sales, leveraging a higher royalty rate from its latest technology in the chips sector. The shift towards premium phones utilizing Arm's cutting-edge technology seems imminent, despite a current downturn in the smartphone and personal computer sectors, which are Arm's principal markets. Investors, adopting a cautious stance lately, are focusing on profitability, steering clear of startups that witnessed inflated valuations in the backdrop of a record-breaking year for deals in 2021.

Interestingly, Arm's substantial influence in the tech hardware sphere is highlighted by its pivotal role in powering nearly all smartphones globally, including giants like Apple and Samsung. Despite a significant portion of its revenue being sourced from China, a market it doesn't directly control, the IPO experienced a surge in enthusiasm, being oversubscribed multiple times. Arm's significant debut augments Nasdaq's reputation, promising potential revenue growth due to the publicity and the recurring revenue generated from annual listing fees, remarks Andrew Bond from Rosenblatt Securities.

Relevant tickers: NVDA, NDAQ, ARM

About the Author: David Love is an editor at Quiver Quantitative, with a focus on global markets and breaking news. Prior to joining Quiver, David was the CEO of Winter Haven Capital.