Topline
Arm stock slumped again Monday, wiping out much of the British chip architect’s gains last week as investors warmly welcomed the largest initial public offering since 2021 and potentially putting a damper on the reemergent IPO market.
Key Facts
Shares of Arm slid about 6% to below $57 by 9:45 a.m. EDT, expanding on its 4% loss Friday.
The stock is now down 17% from its intraday high of $69 achieved during its sparkling Thursday debut, though it remains up about 10% from its IPO price of $51.
The immediate cooldown of Arm shares is reminiscent of similarly hot-then-cold performances of other notable IPOs in recent years, as the stocks of the ten largest IPOs since 2019 are down an average of roughly 50% from their first-day peaks.
Arm’s debut preceded two other high-profile IPOs scheduled for this week in grocery deliverer Instacart and marketing automator Klaviyo, both of which raised the pricing on their initial share prices by about 10% following Arm’s splashy first day.
Crucial Quote
Arm’s IPO valuation was “fair” but there’s “little upside from here,” Needham analyst Charles Shi wrote in a note last week initiating coverage on the stock with a hold rating, recommending investors stay on the “sidelines as the market is still in the early stages of price discovery.”
Key Background
Owned by Japan’s SoftBank, Arm was actually a publicly traded company until 2016. SoftBank listed 10% of its shares in Arm in the IPO. Arm is the largest company to go public since electric vehicle firm Rivian in November 2021.
What To Watch For
On Wednesday, the Federal Reserve will release its quarterly dot plot, which reveals central bank policymakers’ longer-term expectations for the federal funds rate. A moderation in interest rates would be a key indicator of whether the macroeconomic environment will be growth-friendly and thus open the door for a robust IPO market. Ali Ghodsi, CEO of private $43 billion AI startup Databricks, told Forbes last week his company, which is among the most-anticipated possible IPOs, is keenly interested in the direction of rates as it considers when to “go” on an IPO.
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