- Arm stock began trading Thursday following its IPO, which valued the company at $54.5 billion.
- It is the biggest US IPO since 2021, during a pandemic surge that saw massive valuations.
- Shares jumped 21% to $61.66 shortly after trading began around noon.
Shares of Arm made their highly anticipated trading debut on Thursday, marking the biggest US initial public offering of the year, and the largest since 2021.
The stock rose 21% to $61.66 shortly after trading began around noon ET. Shares were priced at $51, at the top of the expected $47 to $51 range. The SoftBank-backed tech company, which designs most of the world’s smartphone chips, achieved a valuation of $54.5 billion after raising about $4.9 billion.
Some strategists have pointed to the spectacular launch as a potential turning point for the broader IPO market, but others are noting that a blockbuster debut isn’t an accurate gauge for the typical company looking to go public. Arm, as well as Instacart’s impending IPO, may not be enough to revive a market that is still trying to shake off a pandemic hangover.
Today, the market is indeed open to new issuances, but companies have to come in with very low valuations, according to Craig Coben, former global head of equity capital markets at Bank of America. Private valuations peaked during the pandemic – a period of historically cheap credit and ample liquidity – and now investors and startups are having to scale back investments.
“When you have a down round through an IPO, you may have to compensate people,” Cobain told Insider. “It creates all kinds of complications at the cap table for companies, your employees, early investors. Who’s going to take it on the chin?”
In any case, when a stock debuts on the public markets, it is driven by hype and complicated by technical and external factors, Coben explained.
No matter how the shares move, Arm’s perceived success or failure will not be known on the first day of trading. A longer time horizon – “12 months, not 12 minutes,” as Cobain said – will determine whether the company has earned a fair, accurate valuation.
On whether the Arm deal signals a thawing of the market for new IPOs, Cobain says investors are receptive to new listings but it’s nothing like the tough days of the pandemic era.
“I think the market is very open,” Cobain said. “Investors’ risk appetite remains, but not nearly at the extremes we saw during the tech boom of 2020, 2021. Constructive but rational.”
Source: markets.businessinsider.com
