Arm climbs 19% in Nasdaq debut after pricing IPO at $51 a share
Arm CEO Rene Haas and executives cheer, as Softbank’s Arm, chip design firm, holds an initial public offering (IPO) at Nasdaq Market site in New York, U.S., September 14, 2023.
Brendan Mcdermid | Reuters
Arm Holdings, the chip design company controlled by SoftBank, jumped nearly 20% during intraday trading on Thursday after selling shares at $51 a piece in its IPO.
At the open, Arm was valued at almost $60 billion. The company, trading under ticker symbol “ARM,” sold around 95.5 million shares. SoftBank, which took the company private in 2016, controls around 90% of shares outstanding.
On Wednesday, Arm priced shares at the upper end of its expected range. On Thursday, the stock first traded at $56.10.
It’s a hefty premium for the British chip company. At a $60 billion valuation, Arm’s price-to-earnings multiple would be over 110 based on the most recent fiscal year profit. That’s comparable to Nvidia’s valuation, which trades at 108 times earnings, but without Nvidia’s 170% growth forecast for the current quarter.
Arm CFO Jason Child told CNBC in an interview that the company is focusing on royalty growth and providing products to its customers that cost and do more.
Many of Arm’s royalties come from products released decades ago. About half of the company’s royalty revenue, which totaled $1.68 billion in 2022, comes from products released between 1990 and 2012.
“As a CFO, it’s one of the better business models I’ve seen. I joke sometimes that those older products are like the Beatles catalog, they just keep delivering royalties. Some of those products are three decades old,” Child said.
In a presentation to investors, Arm said it expects the total market for its chip designs to be worth about $250 billion by 2025, including growth in chip designs for data centers and cars. Arm’s revenue in its fiscal year that ended in March slipped less than 1% from the prior year to $2.68 billion.
Arm’s architecture is used in nearly every smartphone chip, and outlines how a central processor works at its most basic level, such as doing arithmetic or accessing computer memory.
Child said that the company sold $735 million in shares to a group of strategic investors comprised of Apple, Google, Nvidia, Samsung, AMD, Intel, Cadence, Synopsis, Samsung and Taiwan Semiconductor Manufacturing Company. It’s a testament to Arm’s influence among chip companies, which rely on Arm’s technology to design and build their own chips.
“There was there was interest to buy more than what was indicated, but we wanted to make sure we had a diverse set of shareholders,” Child said.
In an interview with CNBC on Thursday, SoftBank CEO Masayoshi Son emphasized how Arm technology is used in artificial intelligence chips, as he seeks to tie the firm to the recent boom in AI and machine learning. He also said he wanted to keep the company’s remaining Arm stake as long as possible.
The debut could kick open the market for technology IPOs, which have been paused for nearly two years. It’s the biggest technology offering of 2023.
Thomas Fuller | Lightrocket | Getty Images
Reddit shares popped about 5% after the social media company debuted new artificial intelligence-powered advertising tools.
The two new features, announced Monday in a post during the Cannes Lions festival, will help brands better leverage discussions on the platform. The company said the tools are powered by an engine called Reddit Community Intelligence that turns “posts and comments into structured intelligence.”
Reddit announced a “listening tool” called Reddit Insights, which shares real-time insights with marketers to help them identify trends and launch campaigns. The other tool, called Conversation Summary Add-ons, allows brands to show “positive” user content under their ads.
“These are tools for a new era of community marketing, one where brands can tap into Reddit’s authenticity and connect meaningfully with high-intent communities around the world,” the company wrote.
The company said Publicis served as the exclusive alpha tester for Reddit Insights, while Lucid and Jackbox Games were among the early testers for Conversation Summary Add-Ons.
Companies across industries are betting on new ways to harness AI to improve advertising campaigns and better engage with users. These new tools are transforming the industry while also putting pressure on some advertising stalwarts.
The industry is also currently navigating a bumpy environment spurred by the trade war with China.
During the recent earnings season, many companies warned of sluggish advertising sales in certain regions due to a rocky macroeconomic environment. Recent developments, however, have suggested a cooling of tensions between the U.S. and China.
Last month, Reddit posted strong sales and upbeat guidance. The company has benefited from recent changes to Google search and internal site improvements, which include convincing logged-out users to open accounts. Logged-in accounts are more beneficial to advertisers.
WATCH: Outgoing WPP CEO says AI will ‘revolutionize’ advertising business
Helsing uses AI to analyze large amounts of sensor and weapons system data from the battlefield.
Pavlo Gonchar | Sopa Images | Lightrocket | Getty Images
European defense technology startup Helsing on Tuesday said that it’s raised 600 million euros ($693.6 million) in a bumper new round of funding.
The investment was led by Prima Materia, the venture capital firm founded by Spotify CEO Daniel Ek and by Shakil Khan, an early investor in the popular music streaming app. Ek is also chairman of Helsing.
Existing investors Lightspeed Venture Partners, Accel, Plural, General Catalyst and Saab also put money in, alongside new investors BDT & MSD Partners.
Defense and the technology behind it have become a hot area for investors lately, amid major global conflicts, including the Ukraine war to Israel-Gaza. Last week saw a further escalation of war in the Middle East as Israel launched a series of airstrikes against Iran.
In 2024, venture funding in Europe’s defense, security and resilience sector reached an all-time high of $5.2 billion, according to a recent report from the NATO Innovation Fund. The sector grew 30% in the past two years, outperforming the broader VC market, which saw a 45% decline over the same period.
Founded in 2021, Helsing sells software that uses artificial intelligence technology to analyze large amounts of sensor and weapons system data from the battlefield to inform military decisions in real time. Last year, the startup also began manufacturing its own line of military drones, called HX-2.
Helsing, which operates in the U.K., Germany and France, said it would use the fresh cash to invest in Europe’s “technological sovereignty” — which refers to attempts to onshore the development and production of critical technologies, such as AI.
“As Europe rapidly strengthens its defence capabilities in response to evolving geopolitical challenges, there is an urgent need for investments in advanced technologies that ensure its strategic autonomy and security readiness,” Ek said in a statement out Tuesday.
Helsing did not disclose its new valuation following the latest financing round, which is subject to “certain approvals,” according to a statement. The firm was previously valued at around 5 billion euros in a 450 million euro funding round led by General Catalyst last year.
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