Chip company Arm starts on the stock market with a price jump

2023-09-14 22:53:14

The chip designer Arm, whose technology is found in practically all smartphones, started trading on the New York Stock Exchange with a price jump. At halftime of trading on Thursday, the stock was trading at around $61, about a fifth above the issue price. The IPO is the largest in the US this year and is also seen as a test for other companies.

The shares first appeared on the US technology exchange Nasdaq at $56.10, ten percent above the issue price. According to media reports, Arm and the Japanese technology group Softbank as owners also considered a price of $52, but decided against it. The shares went out of trading with a whopping price increase of 24.6 percent to $63.59. “The game is back on. The capital markets are open for business again. There will be so many IPOs in the next 12 weeks it’ll be dizzying,” said Thomas Hayes, chairman of private equity firm Great Hill Capital. “The stock markets have had a year and a half of ice age and this marks the beginning of better times .”

After the IPO, Softbank will retain a stake of around 90 percent in Arm and will receive proceeds of around five billion dollars from the share sale. Apple, among others, develops the processors for its devices based on the chip architectures designed by Arm. The semiconductor company Qualcomm, whose chips run many Android phones, also uses it. The companies pay royalties to Arm for the use of the chip architecture. This business model ensures stable revenues and solid profits – but also does not allow for flights of fancy.

Less power consumption than competitors

The Arm designs prevailed in smartphones and tablet computers against chip systems from Intel – among other things because they require less power. Chips based on Arm architectures are now also used in data centers, and Apple uses them in its Mac computers.

Softbank bought the British company in 2016 for $32 billion and took it off the stock exchange. A sale to the chip company Nvidia failed last year due to concerns from competition watchdogs and Arm customers. The IPO was then decided.

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The price range gives Arm a valuation of more than $54 billion. According to information from the financial service Bloomberg, Softbank originally targeted a total valuation of 60 billion to 70 billion dollars. Proceeds of eight billion to ten billion dollars were previously targeted for the IPO.