Arm shares jump by 25% on first day of trading

Shares in chip designer Arm closed up almost 25 per cent at the end of its first day trading on the Nasdaq exchange on Thursday, valuing the SoftBank-backed company at more than $65 billion.

Arm opened at $56.10 (€52.59) per share on Thursday afternoon and closed at $63.59 (€59.61), significantly above the $51 (€47.81) offer price agreed on Wednesday evening.

The closing price gave the chip designer a market capitalisation of $65.2 billion (€61.12 billion) based on shares outstanding, or nearly $68 billion (€63.7 billion) on a fully diluted basis.

The IPO raised almost $5 billion for SoftBank, making it the largest US listing in almost two years. Ten “cornerstone” investors – a set of large Arm customers and partners including Apple and Nvidia – bought $735 million worth of Arm stock as part of the listing.

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Rene Haas, Arm’s chief executive, said discussions with investors during the IPO roadshow had presented a chance to explain “just how different a company that we are today” since SoftBank acquired the Cambridge-based chip designer for $32 billion in 2016.

Arm has striven to diversify its business from being reliant on the mobile market, which is currently in decline, to expand into automotive and data centre chips. “We are far more diversified,” Mr Haas said.

SoftBank discussed with underwriters on Wednesday whether to price Arm shares above the initial range, at $52, but settled on the lower figure in the belief shares would trade up and boost confidence in overall markets after nearly two years of pressure on valuations.

“So many people, including SoftBank and all the underwriters, have so much riding on the overall health of the IPO market,” said one person close to the Arm listing.

Despite selling about 10 per cent of Arm in the IPO, SoftBank has been a “net buyer” of the company’s shares, Mr Haas said. SoftBank last month bought back the 25 per cent of Arm that it did not already own from Vision Fund, an investment firm managed by the Japanese conglomerate, in an internal transaction that valued the chip company at $64 billion.

“[SoftBank chief executive Masayoshi Son] owns more of Arm today than he did a number of weeks ago, so that should tell you that he is very, very optimistic about the future,” said Mr Haas.

“If you look at the fact that they have not sold very many shares, they’re going to be a big shareholder in Arm going forward, they are sharing the vision that I have that the best days for our company are ahead of us,” he added.

Barclays, Goldman Sachs, JP Morgan and Mizuho acted as lead bookrunners on the deal, with a further 24 banks working as underwriters.

The strong reception for Arm’s listing will fuel confidence in the wider IPO market, which has been gradually reopening after one of the worst fundraising downturns in decades.

“Just because Arm can come and do a good IPO ... does that mean everyone can do it? Probably not,” said one banker involved in the deal. “But are conditions improving? Yes.”

IPOs for grocery delivery app Instacart and marketing software group Klaviyo are expected to provide a further test of investor appetite next week. - The Financial Times