“Offerings like this are often beacons to try to decipher what is the sentiment, overall, of this marketplace,” - David Hsu, Professor of management at the Wharton School at the University of Pennsylvania
Biggest IPO of the year: The chip designer, owned by SoftBank, sold 95.5m American depository shares for $51 apiece, translating to a $4.87b capital raise. The IPO is the world’s biggest this year, surpassing the $4.37 billion listing by Johnson & Johnson consumer health spinoff Kenvuex.
Oversubscribed, a boost for equity markets : The IPO was already oversubscribed by 10 times and there were plans by bankers to stop taking orders by Tuesday afternoon. Arm's shares rose 25% in its trading debut - highlighting a warm welcome for the stock.
Closely watched listing, indicator of near term strength of the IPO market: The IPO market has largely been on a dry spell this year. Hence, the fate and performance of Arm's stock and IPO was seen as a "beacon to try to decipher what is the sentiment, overall, of this marketplace".
Revival of the IPO market: The good performance of Arm's IPO meant that more companies may go public in the coming months (note that there is a backlog of roughly 200 companies that should have gone public by now, according to an analysis by PitchBook), thawing the slumping equity markets by boosting confidence of other issuers. Barclays' CEO also mentioned on Tuesday in a separate and unrelated conference that Barclays sees early signs of rebound in investment banking. Other upcoming planned IPOs like Birkenstock (which just filed for IPO and could be valued at $8b+) and Instacart (which just raised IPO price range following Arm's debt) will no doubt help catalyze the end of the cold streak.
In light of potential upcoming IPOs, here's a reminder that Buffett hates IPOs: Buffett has a strong history of avoiding IPOs. When asked in 2019 if he planned to buy the highly anticipated Uber IPO, Buffett replied, “In 54 years, I don’t think Berkshire has ever bought a new issue.”. Buffett also argues that IPOs are when commissions, selling enthusiasm and desire to get the deal done are high. There are probably better alternatives to park your capital than an issuance with such characteristics.
Easing up the metaverse messaging: Meta is rolling out a fresh set of advertisements for its VR headsets, shifting the spotlight away from Mark Zuckerberg's metaverse vision and instead highlighting these VR headsets as essential tools for professional purposes. The campaign will showcase individuals utilizing Meta's VR headsets in fields such as sports, medicine, and the exhilarating world of welding. In October 2022, one year after its major rebranding, Meta introduced an upscale variant of its VR headset known as the Meta Quest Pro. It hit the market with a substantial price tag of $1,500, and the company positioned this headset as a valuable tool for elite professionals.
Why the shift: Meta's endeavor to create an entertaining and social VR environment, Horizon Worlds, has received a lukewarm response. As a result, the company has been investigating approaches to shift the focus of VR away from leisure and towards practicality:
Competing with generative AI: Generative AI has suddenly taken center stage in the metaverse, not only in terms of attention but also in funding. While these two concepts are not technologically incompatible and Meta is actively pursuing its own generative AI endeavors, there is also the question of how to utilize the $21b that the company has already invested in constructing the metaverse.
