[HN Gopher] Arm jumps 18% in market debut to notch $60B valuation
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Arm jumps 18% in market debut to notch $60B valuation
Author : mfiguiere
Score : 60 points
Date : 2023-09-14 19:25 UTC (3 hours ago)
(HTM) web link (www.reuters.com)
(TXT) w3m dump (www.reuters.com)
| pyrophane wrote:
| From an FT article:
|
| > SoftBank discussed with underwriters on Wednesday whether to
| price Arm shares above the initial range, at $52, but settled on
| the lower figure in the belief shares would trade up and boost
| confidence in overall markets after nearly two years of pressure
| on valuations.
|
| > "So many people, including SoftBank and all the underwriters,
| have so much riding on the overall health of the IPO market,"
| said one person close to the Arm listing.
|
| Makes sense given that SoftBank and its underwriters would like
| to have many more IPOs, and the fear that a poor showing here
| could draw out the current "IPO winter" seems reasonable.
| lvl102 wrote:
| They probably got 3-4x what they would've been able to get with
| UK IPO.
| SeanAnderson wrote:
| That's super interesting! 4D chess move to be sure, but also
| kind of crazy that companies plan strategies around affecting
| the entire world market based off of their behavior.
| rendang wrote:
| I saw a twitter commentator point out that this is higher than
| the $40B Nvidia wanted to buy it for. Argument was that stricter
| antitrust could actually lead to greater shareholder value.
| TradingPlaces wrote:
| Also keep in mind that Softbank was going to keep part of the
| company (IoT) in the Nvidia deal.
| blibble wrote:
| the IPO is only for a fraction of the company's shares
|
| whereas the $40B would have been for 100% of them
| TradingPlaces wrote:
| The valuation includes the shares Softbank kept (~90%)
| alex_young wrote:
| Current share price is only the price the last trade was
| made at. It would be remarkable if the other 90% could sell
| for anywhere near that number. Comparing an offer for the
| entire company to selling 10% to the public is a bit
| lopsided.
| TradingPlaces wrote:
| That is why they only sold 10%. They think they can keep
| market depth thin, raise the price, and sell more over
| time at higher prices when they need cash. This is
| exactly what Intel is doing with Mobileye. It's a piggy
| bank that they will break open from time to time.
| blibble wrote:
| which is why it's meaningless to try to equate market cap
| with an unconditional instantaneous purchase of all
| outstanding shares
| arcticbull wrote:
| Generally if you want to buy the whole thing / take it
| private, you have to pay out all shareholders in cash the
| public market price plus a premium - you definitely don't
| get a discount.
|
| Just look at what happened to Elon.
| blibble wrote:
| you don't know what the public market price is for the
| vast majority of the shares that weren't sold today
| arcticbull wrote:
| I don't know what that means - but when an individual or
| a company looks to buy out another company wholesale,
| they do in fact use the public market price, multiply it
| out by the full share cap, and then add a premium on top.
| cunac wrote:
| market cap is same as 100% of shares so it is $25B more than
| Nvidia price
| blibble wrote:
| only if you assume there is the same level of instantaneous
| demand for a supply of 10x as many shares
|
| definitely not the case
| arcticbull wrote:
| That is what you assume when you look to take a company
| private.
| karim79 wrote:
| Am I crazy in thinking that $60(ish) billion feels like very
| little when considering the value brought about by the paradigm
| shifts and hugely successful products (iPhone/Apple M chips/most
| of the SoC's on just about every phone) made possible by its chip
| architectures? Makes Twitter/X seem _hugely_ overvalued, to
| provide one comparison which makes me scratch my head a bit. I
| guess I truly know nothing about anything.
| TradingPlaces wrote:
| They let their customers make most of the money, which is how
| they grew the ecosystem with all the network effects. Just as
| an example, Qualcomm is a 10% customer of ARM, and they made
| $38b in chip revenue in fiscal 2022. ARM had $2.7b. Now they
| want more, and are going to push people to RISC-V if they're
| not careful
| ars wrote:
| You should price it against the replacement value - what would
| it cost to replace ARM? (Or Twitter/X for that matter - in the
| later case you need to include the marketing needed to match
| their current userbase.)
|
| The paradigm shift is utterly irrelevant to their market value.
| Etheryte wrote:
| The chip architecture produces a lot of value, yes, but Arm
| itself does not capture most of that value.
| silisili wrote:
| I tend to agree, but also realize most phones run on razor thin
| if not negative margins. Stocks are all about looking long
| term, and as an investor I'd have concerns about the rise of
| RISCV or other 'free' ISAs on that horizon.
| arcticbull wrote:
| Only Apple (85% of global profit share) and Samsung (12%)
| have positive margins on smartphones. [1]
|
| [1] https://macdailynews.com/2023/08/04/apple-iphone-
| dominates-w...
| qlkjwenf wrote:
| Yeah, Softbank... They evaluated WeWork at ~50 billions and a few
| months later it was worth almost zero. If you work with SoftBank
| prepare to lose everything.
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