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For months, we’ve been following the news drumbeat around the pending IPO of chip-design giant Arm Holdings. We heard Tuesday that the company’s parent, SoftBank, is looking to raise up to $4.87 billion in an IPO, valuing Arm at more than $52 billion.
After the last couple of years, you’d be forgiven for forgetting what an IPO is. But now even talking about such a thing raises hopes that this mega-big start-up could finally open the IPO floodgates.
The motivation: Investors may be hungry to throw some cash at (hopefully) emerging newcomers like, well, Nvidia.
“It could be the deal that breaks the IPO logjam,” said Avery Spear, senior data analyst at IPO research firm Renaissance Capital. A lot depends on how Arm performs not just on the first day of trading, but in the following days, weeks and months, she says. A stock decline can encourage other companies to launch, which can attract investor interest, which in turn leads to more deals.
The arm is both indicative and external. Its current estimated market value is less than $64 billion, the price at which SoftBank bought the shares last month. But that’s higher than the $40 billion that Nvidia (yes, Nvidia again) offered to buy ARM before the deal was blocked by regulators.
That not-high-but-not-bad estimate could provide some reassurance to IPO hopefuls who have been watching the market and deciding when to strike. Many may still have to swallow lower prices compared to 2021 travel dates. “Many venture-backed companies will have to accept the reality of a ‘bottom round’ IPO if they reach the top of the market in 2021. Brian Lynch, Head of Market Insights at EquityZen said.
ARM is unusual for an IPO since it was formed in 1990 as a partnership between Apple, Acorn Computers and VLSI Technology, and is far from a startup. It was a public company before being bought by Softbank for $32 billion in 2016. This year’s next biggest IPO, Johnson & Johnson spinoff Kenvu, was also not a typical debut.
Other IPOs over the years, such as Instacart — which could finally come this year — may be more indicative of Unicorn’s interest in going public, Renaissance Spear said. Marketing automation software maker Clavio might be a good indicator.
One encouraging sign for both public market investors looking for new blood and private company funders looking to exit — the Renaissance IPO ETF, which tracks newly public companies, is up more than 33% this year.
Programming Note: Brianne Lynch of EquityZen will join Yahoo Finance Live on Wednesday at 10 a.m. ET.
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