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Arm jumps 18% in market debut to notch $60B valuation
- rendang 3y agoI 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.
- blibble 3y agothe IPO is only for a fraction of the company's shares whereas the $40B would have been for 100% of them
- TradingPlaces 3y agoThe valuation includes the shares Softbank kept (~90%)
- alex_young 3y agoCurrent 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 3y agoThat 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 3y agowhich is why it's meaningless to try to equate market cap with an unconditional instantaneous purchase of all outstanding shares
- arcticbull 3y agoGenerally 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 3y agoyou don't know what the public market price is for the majority of the shares as only 10% were sold today
- arcticbull 3y agoI 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. That's literally how a buyout works.
- blibble 3y ago> I don't know what that means maybe we should stop here then
- arcticbull 3y agoYour sentence didn't make sense - just look up how buyouts work and how they're priced.
- RussianCow 3y agoThat's literally not how buyouts work. The public stock price is certainly one factor of many that go into calculating the acquisition price, but it is not an absolute floor. One counter-example that comes to mind is Yahoo!, which was purchased by Verizon for less than its market cap at the time.
- cunac 3y agomarket cap is same as 100% of shares so it is $25B more than Nvidia price
- blibble 3y agoonly if you assume there is the same level of instantaneous demand for a supply of 10x as many shares definitely not the case
- arcticbull 3y agoThat is what you assume when you look to take a company private.
- twoodfin 3y agoThink about it this way: The current market price represents the amount the shareholders who least value their shares would be willing to sell them for. As you want to acquire more, the price is going to go up, not down.
- RussianCow 3y agoThat's pretty irrelevant if it only represents 10% of the total equity, though. It's not like you, as a retail investor who owns a few shares of a company, have any say in whether it gets acquired.
- twoodfin 3y agoSoftBank values continuing to hold the other 90% of the shares more than the market price or they’d be selling more.
- TradingPlaces 3y agoAlso keep in mind that Softbank was going to keep part of the company (IoT) in the Nvidia deal.
- devnullbrain 3y agoNvidia is worth over 3 times as much as it was at the start of the attempted acquisition.
- pyrophane 3y agoFrom 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 3y agoThey probably got 3-4x what they would’ve been able to get with UK IPO.
- SeanAnderson 3y agoThat'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.
- HPMOR 3y agoMatt Levine has a great piece on ESG actually being a market reaction to the fact most people own index funds now. Since most people are concerned about the OVERALL market now, ESG serves to optimize an externalized concern for the entire market at specific firms.
- idontwantthis 3y agoWhat is ESG?
- tuatoru 3y ago"Environmental, Social, and Governance" Monopolist corporate feelgood bs, basically. A moral licence to exploit, analogous to licence to pollute.[2] [3] 1. https://en.wikipedia.org/wiki/Environmental,_social,_and_corporate_governance https://en.wikipedia.org/wiki/Environmental,_social,_and_cor... 2. https://www.theguardian.com/environment/2023/jan/24/carbon-offsets-are-a-licence-to-pollute https://www.theguardian.com/environment/2023/jan/24/carbon-o... 3. https://en.wikipedia.org/wiki/Recycling https://en.wikipedia.org/wiki/Recycling
- karim79 3y agoAm 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.
- silisili 3y agoI 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 3y agoOnly 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-with-85-smartphone-profit-share/ https://macdailynews.com/2023/08/04/apple-iphone-dominates-w...
- TradingPlaces 3y agoThey 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 3y agoYou 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 3y agoThe chip architecture produces a lot of value, yes, but Arm itself does not capture most of that value.
- qlkjwenf 3y agoYeah, 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.
- yieldcrv 3y agoI mean in that case Softbank and their LPs lost, retail did not. Culty employees didnt really either. In this case Softbank and LPs win it all back and dumps their shares on retail.