According to the VC behind Airbnb and Pinterest, Arm Holdings (Arm IPO) will help kick-start the IPO market.

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Opening of Arm IPO

Rick Heitzmann of FirstMark Capital thinks that actual, fundamental demand for IPOs is once again growing.

According to the creator and partner of the company, “people are looking for the new toy,” on Thursday’s “Fast Money” .

(Arm IPO) Arm, a Softbank-affiliated chip design business, had an almost 25% increase in its Nasdaq debut on Thursday. Its market value was $65.2 billion at day’s conclusion.

Even so, this is not a true IPO. Heitzmann said, “This is a re-listing by Softbank to the public of a firm akin to Kenvue, which was the J&J [Johnson & Johnson] spinoff. There are others that desire to purchase IPOs.

Heitzmann thinks that the current climate for IPOs is more sensible than the one with zero interest rates in the past. He thinks Arm management made sure the IPO would succeed.

The pricing had to reflect the pop. The market would have felt quite differently today if Arm had traded lower,” said Heitzmann. “They also have a little, constrained float. They are consequently limiting demand and setting prices appropriately.

And Heitzmann anticipates that Instacart’s IPO will emulate Arm’s success the following week.

Heitzmann, who has no financial interest in Arm or Instacart, claimed that this is the reason why the price of the company will be reduced by 70% from the last private round. They are setting the price to enter a favorable new normal for an upswing.

After the markets close on Monday, Instacart is scheduled to announce its pricing and begin trading on Tuesday at the Nasdaq under the ticker CART.

Heitzmann anticipates strong initial performance for the stock of the grocery pick-up and delivery service. He points out that Instacart’s advertising revenue should also help the company’s bottom line.

To advertise against them, they are selling goods with very low profit margins, he claimed. It’s been a successful supermarket model. It has served as a solid example for Amazon.

Arm IPO

Heitzmann, however, wonders which investors will genuinely profit from the upcoming IPOs of marketing automation firm Klaviyo and Instacart.

People were interested in knowing how much hunger the large conventional IPO purchasers have, Heitzmann added. “We’ll find out the following week.

A pipeline being opened for Arm IPO

Dealmaking has reached its lowest points in more than ten years as a result of poor values brought on by recessionary worries and rising interest rates. A lot of IT businesses that are waiting to go public see Arm’s offering as a weather balloon, according to Wall Street.

This summer, Goldman Sachs (GS) announced a 20% decrease in second-quarter 2023 revenue from investment banking. Overall, the quarter’s earnings of $1.2 billion decreased by 58% from the same period last year.

Arm IPO

According to Goldman Sachs CEO David Solomon, during a recent earnings call, “clients essentially maintained a ‘risk off’ stance over the course of the quarter, and activity levels in several sectors of investment banking linger near decade-long lows. This indicates that customers are concerned about placing bets in a volatile economic climate.

However, according to analysts, there are a lot of healthy firms ready to go public; they simply don’t want to be the first ones out.

If (Arm IPO) Arm has a good launch, it may be the major IPO that opens the door for the others.

Dave Sekera, chief US market strategist at Morningstar Research Services, declared, “This is a big deal.” The key lesson here for investors, even in the free markets, is that if this IPO is a success, it will pave the way for a torrent of further IPOs. The stock market as a whole would have a favorable market mood as a result.

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