Arm falls below flotation price amid market jitters over tech

Billboard at the Nasdaq stock market showing Arm Holdings' sign
Billboard at the Nasdaq stock market showing Arm Holdings' sign

Shares in British microchip design company Arm have sunk below its initial public offering (IPO) price as investor interest slumps following last week’s blockbuster float.

Arm’s stock fell below $51 (£41) on Thursday, the price at which it went public a week earlier, as analysts raised questions over demand for its semiconductor technology.

The Cambridge-headquartered business returned to the stock market last week, floating on New York’s Nasdaq exchange at a valuation of $54bn, the largest such deal this year.

The company’s majority owner, Japanese investor SoftBank, sold 10pc of its stake in Arm in the float to investors including iPhone-maker Apple and graphics chip company Nvidia.

Its shares climbed as high as $68 on their first day of trading as investors bought into the rare listing in an otherwise slow year for public offerings.

However, since then its stock has fallen by around a quarter and slipped as low as $50 on Thursday.

Arm’s semiconductor architecture is used as a blueprint for billions of smartphone processors, as well as in data centre microchips.

Its float last week was billed as an opportunity to buy into the artificial intelligence boom as demand for powerful processors soars.

However, some analysts have questioned Arm’s lofty valuation. The global smartphone market is enduring a sharp downturn, while Arm is also facing emerging competition and risks from its exposure to China.

On Monday, Sara Russo, an analyst at investment bank Bernstein wrote in a note to clients: “Mobile and consumer end markets make up close to 60pc of revenues and both continue to be challenging.”

Last week, analysts at Needham added the company’s valuation “looks full”, adding “there’s little upside from here”.

Separately, SoftBank’s finance chief launched an attack on ratings agency S&P Global after the analysts failed to upgrade the Japanese business’s credit rating.

Yoshimitsu Goto told the Financial Times the decision was “completely mind-boggling”. He added: “They don’t trust our management in terms of financial discipline or investment policy.”

The S&P update said SoftBank’s “investment gains and losses will likely remain potentially volatile”. SoftBank has invested tens of billions of dollars in technology businesses, which have endured sharp swings in their valuations.

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