Arm Back Near IPO Price After Dramatic Debut

It's early days but the hype has evaporated quickly after a big first day as a public company.

James Gard 22 September, 2023 | 11:47AM
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Arm holdings

A week after Arm (ARM) floated in New York, how’s life as a public company going for the UK-based chip designer?

As often happens when shares “pop” on the first day, the hangover often follows pretty quickly after the party. Arm shares surged nearly 25% last Thursday, but this week they’ve traded below their IPO price of US$51. Last night’s close saw the shares at US$52.16, making the company worth US$53.53 billion. As my back story shows, SoftBank bought Arm for US$32 billion.

ARM share price

As my colleague Jocelyn Jovene pointed out last week, the stock trades on an earnings per share multiple of 86 times earnings for fiscal 2023 and 66 times for 2024 – making it one of the most expensive stocks in the semiconductor industry. Ahead of the float on September 14, Morningstar analyst Javier Correonero said that “from a valuation point of view,” says, an equity analyst at Morningstar, the stock looks “very, very expensive.” That was based on a valuation of US$50 billion, and at one point last week that surged to US$60 billion.

Still, it’s very early days and we await Morningstar coverage on the stock. The track record for highly priced IPOs is mixed at best. Uber (UBER) is still trailing its 2019 float price, but Facebook, now Meta has increased in value almost 700% since it made itde debut in 2012. Hype is generally bad for new investors in the short term, but it’s hard to predict whether a company has the staying power to go on from a blockbuster debut.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
ARM Holdings PLC ADR114.64 USD1.88Rating

About Author

James Gard

James Gard  James Gard is senior editor for Morningstar.co.uk.

 

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