ARM IPO – Listing Tonight, Should You Chase?

14th September, 2023, 8:42 PM


Arm is set to trade tonight with an IPO price of $51. It is debut as the blockbuster IPO of the year and hopes of it to rejuvenate the IPO market. TSMC is investing up to 100million in ARM Holding’s IPO and many big names like AMAZON, APPLE, MICROSOFT, NVIDIA are also said to be some of the anchor investor.

A common question we get is, can buy?  With such hype, a natural feeling to want to quickly get in on the opening day is understandable. Here’s a little snapshot of what they do and our thoughts at the end if one should chase the price.

ARM chips are made by companies including Amazon, Alphabet, AMD, Intel, Nvidia, Qualcomm and even Samsung. Arm doesn’t build its own chips but anything when a company builds a chip based on ARM’s architecture, ARM takes a fee or royalty. For example, all of Apple’s chip is built based on Arm’s architecture and it takes a fee on that. Or whenever you buy anything that runs on Nvidia chip, Arm also takes a small fee.  So they earn these recurring fees every year.

In terms of market share, they own about 99% of the mobile phone application processor, 64% of the embedded computing market.

They have a wide economic moat, a good brand monopoly with a vast library of intellectual properties. They also have a large and established ecosystem.

There are also risk involved like customer concentration. Their top5 customer makes up 57% of their revenue and ARM China makes up about 24%.

As they are going IPO, we can only see the last 3 years of financial data. Having a longer data would be better as it provides more insight to a company’s profitability and sustainably

-Revenue was for from 2022-2023, net income was -4.5% while free cash flow increased from 2022-2023 but it decreased from 2021-2022.

So in conclusion, I won’t be chasing the price tonight. And like most BIG HYPE IPOs theat were listed, it tends to come off after awhile when the hype dies down. Referencing from some big IPO like meta, Airbnb and even Rivian, they all dropped eventually after going IPO. Will ARM be like that? I would prefer to be on the side lines and not chase and wait for a retracement first.  THAT IS WHEN I will be looking at it. Currently at $51 it might be a little too expensive for my liking.

Want to know when i might get into ARM??



Kelwin & Roy