Stellar Snippets
Arm (ARM) stock rose close to 25% on its first day of trading.
The IPO generated almost $5 billion for SoftBank (SFTBY), the majority owner with a 90% stake in Arm stock.
Market watchers raised concerns about Arm's initial valuation, which is 36% above Nvidia's (NVDA) previous offer for the company last year.
Daniel Newman, CEO of The Futurum Group, commented, "It's hard to convince the market to pay such huge premiums when you're not growing as a company."
Arm's fiscal 2023 revenue dipped to $2.68 billion, mainly due to weak smartphone sales.
Major semiconductor designers, including Apple (AAPL), AMD (AMD), Qualcomm (QCOM), Nvidia, and numerous others, use Arm's chip designs.
Arm derives 63% of its revenue from royalties, which allows Arm to earn a payment per chip sold.
The Arm stock valuation is "based more on SoftBank's self-dealing in private markets to manipulate the valuation higher than the fundamentals of the company," as per a research firm.
Analysts recommend avoiding this IPO due to limited upside potential and suggest considering other tech companies with growth prospects and reasonable valuations.