Arm Kicks Off IPO Market Rebound

Plummeting public and private market valuations during 2022 caused many “big name” companies to delay their plans to go public. But as rates and inflation stabilized this summer and the Nasdaq rose over 40% from its October lows, several companies began testing the waters again. 🤔

With that said, British semiconductor designer Arm Holdings is the largest U.S. IPO since 2021 and the first major tech name to test investors’ risk appetite. And test the appetite it did. 

The SoftBank-controlled chip giant priced its shares at the top end of its $47-$51 expected range, giving it a roughly $54.5 billion valuation. 💰

Demand was expected to be strong out of the gate, with the company pre-selling 735 million shares to a group of strategic investors, including Apple, Google, and Nvidia. And retail investors focus on Nvidia and the artificial intelligence (AI) revolution spurred a lot of demand at retail brokerages like SoFi and Robinhood that had small allocations available for their clients at the $51 price point.

As a result of this demand, it’s no surprise that the stock initially popped around 10% from its list price, opening at $56.21 around noon ET and rallying from there. The 1-minute chart shows prices relaxed midday but surged late in the trading day to close 25% above its list price at $63.59 at a $60 billion valuation. 🤩

It offered 95.5 million shares, raising the company just under $5 billion, though it’s important to note SoftBank still owns roughly 90% of its shares. 🤑

Despite a successful first day of trade, some argue Arm’s valuation is lofty compared to its peer group. The bull case is that Arm expects the total market for its chip designs to be $250 billion, so with it’s annual revenue in the $2.7 billion range, there’s a lot of room for growth.

We’ll have to see if the market continues to support this valuation in the days ahead. But for now, there appears to be a lot of appetite for a potential growth story in the semiconductor industry. 🤷

As for whether Arm’s IPO can kick off a flurry of new deals for bankers, signs are that’s unlikely to be the case. Investors have been burned by many recent public offerings, whether done traditionally or through a special purpose acquisition vehicle (SPAC). As a result, they’re behaving cautiously and opting to participate in big-name IPOs like Arm, where there’s a clear appetite from Wall Street and Main Street. 

The chart below from shows 109 IPOs so far in 2023, at the lower end of its range since 2000 and well off its 2020 and 2021 peaks. The early part of this new decade brought with it a lot of froth. And past booms suggest it’ll take a few years for that excess to work itself off before returning to more average numbers. 🧊

Now that Arm’s IPO is officially in the books, investors will be looking ahead to the Instacart ($CART) and Birkenstock ($BIRK) IPOs. 👀

Lucid Lingers Near Its Lows

Shares of luxury electric vehicle maker Lucid Group continue to linger near all-time lows after disappointing third-quarter productions and delivery data. 📋

Before the opening bell, it disclosed that it produced 1,550 vehicles during the third quarter, down 28.7% QoQ and 32.1% YoY. It also had more than 700 vehicles in transit for final assembly. As for deliveries, they were up 3.8% QoQ and 4.2% YoY to 1,457 vehicles. 🏭

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Sphere Entertainment Comes Full Circle

Premier live entertainment and media company Sphere Entertainment made headlines this weekend with the opening of its Las Vegas venue. 😮

The Sphere is a “next-generation entertainment medium” where people experience a fresh take on live entertainment in its dome-shaped arena with wall-to-wall video screens. And it debuted this weekend in Las Vegas with a performance from the rock band U2 on both Saturday and Sunday.

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Rite Aid Throws In The Towel

Two months after we last spoke about it, pharmacy retailer Rite Aid is back in the news again. Unfortunately, for a similar reason as last time. 👎

In August, the drugstore chain warned it was preparing for bankruptcy as it buckled under mounting debts and lawsuits over its role in the opioid epidemic. Today, the company officially filed for Chapter 11 bankruptcy protection in New Jersey, appointing a new CEO to lead the restructuring plan. 📝

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Target Drops On Store Closures

Big-box retailer Target continued its precipitous decline today after becoming the latest company to close some stores due to violence and theft. ❌

The company said it will close nine of its nearly 2,000 U.S. stores after struggling to control crime and safety at those locations. The impacted cities include New York City, Seattle, San Francisco, and Portland. 

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