Arm IPO: ARM stock jumps nearly 25% in its first day of trading

The largest IPO of the year is showing a lot of strength as shares of Arm Holdings began trading Thursday afternoon.

The chip designer’s stock priced at $51 per share for its debut and was trading at nearly 20% above that within an hour. It held those gains to close up nearly 25%, to $63.59 a share.

That’s good news for investors and companies that have been sitting on the market’s sidelines, as Arm’s solid opening could spur more companies to initiate their own IPOs, after a nearly two-year drought.

Arm’s market debut is the biggest since Rivian went public two years ago. The IPO price, which was at the top end of its range, valued Arm at $54.5 billion. That’s big, but given the company’s role in designing chips used by artificial intelligence products, parent organization SoftBank had initially hoped to see a value of up to $70 billion. (Still, the raise was far more than the $32 billion Softbank paid for Arm in 2016.)

Of course, with the runup in the stock’s price Thursday, it could close near the $70 billion level soon, despite lingering concerns about the company’s less than stellar financial performance.

(Even with the IPO, it’s worth noting, Softbank remains firmly in charge of Arm. The company’s F1 form noted Arm will be a “controlled company,” meaning the majority of the voting power is controlled by a single person or entity—SoftBank. It’s not unlike Meta, where Mark Zuckerberg has power over the board’s votes.)

With Arm’s IPO off to a strong start, Wall Street’s eyes turn to other imminent and possible debuts. Instacart will likely get the biggest focus next. Also waiting in the wings is data and marketing automation company Klaviyo.

Should those companies have a strong start, even if it’s not as strong as Arm, that could convince other tech companies to go public as early as the fourth quarter of the year. Since Klaviyo is less well-known than Arm or Instacart, that could make it a better litmus test for some companies, showing investors’ appetite for debuts that aren’t everyday names.

Overall, the tech market does seem primed for new listings The Nasdaq composite index is up 34% year to date, largely on the strength of Nvidia and Meta. Part of the pause in IPOs has been that none of the slew of companies contemplating a public offering wanted to be the first to test the waters. Arm’s debut arguably removes that concern—and its success might light a fire under executives who have been waiting.

There are, of course, other factors that make an IPO more appealing. The Federal Reserve’s aggressive rise in interest rates means it’s harder for businesses to secure funding from banks or venture capitalists. That might spur late-stage companies to take the leap, though investors are going to be more focused on profitability now than they would have been two years ago.

There are several companies that are reportedly eyeing an IPO, but haven’t filed the paperwork. Stripe, Reddit, Discord, and Impossible Foods are among the names that have been floating on Wall Street, some for the better part of two years.

While there’s no word from any of those companies, it’s a safe bet they’re all closely watching how these new IPOs perform in the coming weeks. 

Update, September 14, 2023: This article has been updated with Arm’s closing stock price.