In its first public offering (IPO), ARM (Advanced RISC Machines) received a $54.5 billion starting valuation. On Thursday, ARM stock will start trading on Nasdaq.
The price of the initial public offering (IPO) for 95.5 million shares of ARM was set at $51, which was the higher end of the anticipated range of $45 to $51. The dominant owner SoftBank (SFTBY), which still owns 90% of the ARM shares, received roughly $5 billion from the IPO.
Futurum Group CEO Daniel Newman said, “It’s hard to justify paying such a big premium when you’re not growing as a company.” Market watchers have expressed concerns about ARM’s first valuation, noting that it is 36% more than the bid made for the business by Nvidia (NVDA) last year.
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Every significant semiconductor manufacturer, including Apple (AAPL), AMD (AMD), Qualcomm (QCOM), Nvidia, and many more, uses ARM’s chip designs. ARM’s revenue for the fiscal year that ends on March 31, 2023, decreased to $2.68 billion due to sluggish smartphone sales.
ARM presently gets 37% of its income from licencing and 63% from royalties. Through royalties, ARM is able to get paid for each chip sold that uses its ideas. Giving consumers access to ARM-based processors through licencing allows them to expand their intellectual property portfolios.
 “We believe investors should avoid this IPO, as we see limited upside given the many other companies in the tech space offering investors growth at reasonable prices,” New Constructs analysts wrote in a research. The value of ARM shares, according to research firm New Constructs, “relies more on SoftBank’s behaviour in private markets than the company’s fundamentals.”
The first of many prospective tech IPOs on the market this month is ARM. The marketing software business Klaviyo and the supermarket delivery service Instacart are scheduled to go public the following week.
