IPO Report: Arm’s stock soars 25% in public debut as execs sees big opportunity to drive cost savings for chip makers

by | Sep 14, 2023 | Stock Market

U.S.-listed shares of Arm Holdings PLC surged out of the gate Thursday and closed 25% above their pricing after they began trading on the Nasdaq, following a long-awaited initial public offering. Arm’s American depositary receipts
began trading just after noon Eastern time Thursday, opening at $56.10 and rallying as much as 30% above their initial public offering price of $51. Shares finished up 24.7% at $63.59.

Arm priced those shares at the high end of its expected range Wednesday. Chief Financial Officer Jason Child told MarketWatch on Thursday that Arm’s focus going forward would be to take advantage of the skyrocketing costs of making smaller and smaller nanometer-sized transistors for chips. As transistors get smaller, the cost for intellectual property and software verification has ballooned to take up as much as three-quarters of the design cost, he said. Rather than take on that cost themselves, chip makers are starting to farm that out to Arm, he said. “It’s allowing us to do the work, and then monetize the work that we do — for IP verification, software verification — we do that and sell it to everyone else at a fraction of the price what it would cost for them to do it on their own,” Child told MarketWatch. “What it does is it allows us to actually get higher royalty rates over time because of the cost savings folks are getting by using us versus trying to maybe do more of the work on their own,” Child said. The CFO said this is part of why Arm is getting more business designing full compute subsystems rather than just providing instruction sets for central-programming units. “As a result, we’re seei …

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