Arm Holdings Makes Highly-Anticipated Nasdaq Debut with $54.5 Billion Valuation
In a significant milestone for the United States’ IPO market, Arm Holdings, the chip designer under SoftBank’s umbrella, is set to make its debut on the Nasdaq. The listing is poised to be a litmus test for IPOs following a nearly 16-month drought in major offerings.
Arm Holdings achieved a substantial valuation of $54.5 billion by pricing its initial public offering at $51 per American Depositary Share, marking a notable ascent from its $32 billion valuation when it was taken private by SoftBank seven years ago. SoftBank, which had been seeking to divest some of its Arm Holdings stake since at least 2020, when a $40 billion deal with chipmaker Nvidia fell through due to regulatory challenges, is set to benefit from this listing. The IPO raised $4.87 billion for SoftBank, which still retains a 90.6% stake in Arm Holdings. Apple, Intel, and Alphabet were among the cornerstone investors who participated in the offering.
The resurgence in the IPO market is hinged on the success of high-profile listings such as Arm Holdings, along with other prominent startups like Instacart and Klaviyo. Investors have become more discerning, favoring profitability over cash-burning startups that enjoyed lofty valuations in 2021 amid a record year for deals.
“The Arm IPO is the most hyped listing we’ve had in the markets for a while,” noted Kyle Rodda, a senior market analyst at brokerage firm Capital.com. It’s a significant test of risk appetite and whether high-growth, speculative companies can still attract interest in a new era of higher interest rates.
Arm Holdings has established itself as a linchpin in the tech hardware ecosystem, with its chip designs powering virtually every smartphone globally, including Apple’s iPhones and Samsung’s Android-based devices. Despite concerns about its exposure to risks in China, the IPO has seen substantial oversubscription, indicating strong investor enthusiasm.
Leading up to Arm’s debut, chip stocks, including Nvidia, Intel, Advanced Micro Devices, Broadcom, Qualcomm, and Micron Technology, saw premarket trading gains between 0.6% and 1.2%.
Arm Holdings has informed potential investors that the cloud computing market, where it holds only a 10% share, has ample room for expansion, with an expected annual growth rate of 17% through 2025, driven primarily by advances in artificial intelligence.
Barclays, Goldman Sachs, JPMorgan Chase, and Mizuho Financial Group serve as the lead underwriters for this high-profile IPO.
The Nasdaq, where Arm Holdings has chosen to list, stands to benefit both in the short term and the long term. Large IPOs like Arm’s offer immediate publicity and contribute to the exchange’s recurring revenue through annual listing fees.
Andrew Bond, Managing Director and Senior Fintech Analyst at Rosenblatt Securities, pointed out that “Anytime it [Nasdaq] gets a new listed company, it’s able to drive revenue not just through the listing, but also through the other services that it sells to these listed companies on their exchange.”
Furthermore, Arm Holdings’ IPO is expected to position the Nasdaq ahead of its rival NYSE in terms of capital raised this year. Following Arm’s stock offering, Nasdaq has hosted 67 traditional U.S. IPOs, raising a combined value of $8.6 billion, while the NYSE has had eight listings raising $6.4 billion.
The Nasdaq currently has nearly 157 companies waiting to go public, representing a 40% increase from a year ago, according to a source familiar with the matter.