Arm has concluded its debut on the Nasdaq after launching an IPO where shares closed nearly 25% higher on the day.
SoftBank Group’s chip design company, Arm Holdings spiked nearly 25% on its initial public offering (IPO) debut after shares sold for $51.
The company began trading at a valuation nearing $60 billion, under the “ARM” ticker. Arm sold 95.5 million shares, initially trading at $56.10, and closing at $63.59. According to Marketwatch data, Arm is at $65.61 in after-hours trading, climbing more than 3% from its close.
Speaking to CNBC, Arm’s Chief Financial Officer Jason Child said the company sold shares worth $735 million to several strategic investors. These include heavyweights like Nvidia Corp, AMD, Samsung, Intel Corp, Google, Apple, Taiwan Semiconductor Manufacturing Company (TSMC), Synopsis, and Cadence. According to Child, Arm deliberately ensured to keep its sales to a “diverse set of shareholders” even though “there was interest to buy more than what was indicated”.
Child also said that Arm wants to grow its royalties by providing essential products to customers. Most of the company’s royalties come from releases that are more than a few decades old. In 2022, Arm’s revenue from royalties was $1.68 billion. About 50% of this figure were royalties from products launched between 1990 and 2012.
Speaking on the royalties, Child said:
“As a CFO, it’s one of the better business models I’ve seen. I joke sometimes that those older products are like the Beatles catalog, they just keep delivering royalties. Some of those products are three decades old.”
Arm IPO Debut Contributes to $250B Chip Design Market Forecast by 2025
Arm announced the $51 price before trading on the Nasdaq began, adding that underwriters have the option to buy an additional 7 million shares to account for over-allotment. Although Arm has debuted publicly, SoftBank Group retains majority control of the chip designer, at about 90%.
Arm told investors that its forecast for the chip design market by 2025 is $250 billion.
The Nasdaq IPO is the second time Arm is going public since being founded in 1990. The company was acquired by SoftBank in 2016 in a deal worth $32 billion. Before then, Arm had listings in London and New York.
Arm has almost always focused on hardware for mobile phones and has its tech in most mobile phones used today. In addition, Arm sold blueprints for microprocessor designs, as well as licensing instructions necessary for software to ensure compatibility with the chips. Although that part of its business is still active, CEO Rene Haas has been trying to diversify. Following his appointment last year, the CEO is now focused on expansion, pushing the company into advanced computing and designing chips for artificial intelligence (AI) data centers.
Arm is already using its processors to lift AI workloads, especially in smartphones. The company’s processors already help with image filtering and voice recognition on many devices. However, it might take a while for Arm to reap the financial benefits of these AI offerings.
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