UK Chip Designer Arm Sees Significant Surge in Market Performance

17 Sep, 2023

UK Chip Designer Arm Sees Significant Surge in Market Performance

Investors eagerly acquired shares of UK chip designer Arm Holdings as it made its return to the stock market, propelling its market valuation to over $60 billion (£48.3 billion). By the end of Thursday's trading session, the shares were trading at over $63 each, marking a nearly 25% increase from the $51 per share that Arm had received from its offering.

This IPO was the largest of the year, generating $4.87 billion for its parent company, Softbank Group. The remarkable surge in share price has been interpreted as a vote of confidence in Arm.

Despite concerns about the company's exposure to various risks in China, market sentiment remained overwhelmingly positive. Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, commented, "Despite some concerns about the company's exposure to numerous risks in China, it's not stopped a juggernaut of enthusiasm."

Arm, a prominent player in the British technology industry, specializes in chip designs for a range of devices, including smartphones and gaming consoles. It is estimated that approximately 70% of the global population uses products relying on Arm's chips, with nearly all smartphones worldwide featuring their technology.

Arm's CEO, Rene Haas, expressed optimism about the company's growth prospects, citing increasing demand for its products driven by investments in artificial intelligence (AI). "He emphasized, "AI's operation relies on Arm," and further stated, "We believe we're only in the initial stages."

Arm's return to the stock market had been eagerly anticipated. While there had been lobbying for the company to list its shares in the UK, it ultimately chose to proceed with a listing in the US in March. Mr. Haas explained that the decision was based on the Nasdaq's experience in handling substantial share sales by tech firms but didn't rule out the possibility of a London listing in the future.

Hermann Hauser, an early contributor to the development of Arm processors, attributed the decision to list in the US instead of the UK partly to the UK's Brexit decision, which had an impact on the status of the London Stock Exchange. He expressed the hope for a dual listing but acknowledged its challenges due to the size of the IPO.

Softbank disclosed that it had sold 95.5 million shares at $51 each, retaining a roughly 90% stake in Arm. The company had taken Arm private seven years earlier in a $32 billion deal. A planned sale to US chip giant Nvidia was abandoned in February of the previous year, citing regulatory hurdles in the UK, US, and European Union.

Mr. Haas acknowledged the complexities of navigating the political landscape related to China, a challenge shared by many tech companies.