Arm shares set to soar as UK chipmaker joins the Nasdaq – business live

Arm close 25% higher

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

Dominic Rushe

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.

More here.

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 14^th 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

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

Arm’s flotation (once its shares actually start trading…) will set the tone on Wall Street, points out New York Times writer Erin Griffith: