Arm Makes Its Public Debut

From the heart where innovation, money and power collie in Silicon Valley n beyond. This is Bloomberg Technology with Caroline Hide and Ed Loudlow.

I'm Shnalli Bassik at Bloomberg's world headquarters in New York. Ed Ludlow is off today and Caroline Hyde is live at the Nasdaq.

This is Bloomberg Technology. Coming up.

We are alive from NAZAK to bring you full coverage of the ARM IPO as it makes us trading debut as the biggest.

IPO of the year.

More ahead and as ARM makes his trading debut, will push ahead to the other companies lining up to go public. During our venture capital squadline, we'll also look at the prospects and use case for digital dollars with former head of the CFTC Chris John Carlow.

All that and more coming up next.

Now before we head over to the az DEC, we're Caroline hied Is standing by with a very senior executive.

We are also.

Getting indications that ARM may open shortly in the next ten to fifteen minutes. We are getting price indications of about fifty six dollars give or take fifty six thirty That would give the firm evaluation of about sixty billion dollars.

Let's see where were head though, Caroline.

We are heading over now to Caroline and Karen s Now Senior VP and Global head of Listings over at Nasdaq.

Shanani, thank you so much, and yes I am sat here with Karen and wow, we're back at it.

We've almost forgotten.

How's IPA.

It's very exciting.

How important is this ARM listing for the rest of the companies that now stand to list. I think you were saying, what one hundred and fifty seven of their waiting to come to the market.

It's important, it needs to trade well. I think that.

This is a moment in time that everyone is really paying attention to. The markets have been open for great companies for some time now when you look at the VIX and the second market and what we're seeing in the private markets, but it's really been on the supply side, and ARM is really set to unlock that.

What's so interesting about ARM is how idiosyncratic it is or not, because many want this to be a bell weather. It's in the tipping point of AI, also China or anxiety. But what's so interesting is it's only a little free flowt less than ten percent? How easy or heart is it therefore to square up demand as apply at this moment? Is anyone going to want to be a seller? What's happening behind the scenes.

Yeah, well that is why it's taking a little bit of time to open. It's really important to get the opening cross right. And one of the things that we do is we provide technology to the person opening the stock, and that's JP Morgan.

In this case. It's called a stabilization.

Agent, and we've turned it into more of a science than an art. There still is an art, though, and you want enough buyers and sellers in that opening cross to price the opening at a level that it'll trade.

Well when you have that sort of technology is that's what wooing the likes of arm the likes of instacart are looking to come with an ASDAC as well. How do you set yourself apart from some of the other exchanges in this moment right.

Well, it is a part of it. I would say.

We do find that the underwriters have more information and that's really helpful to them.

But there are other factors.

Obviously, I would say brand alignment is really important. The fact that we have owned and operate or differentiated services, So we really build relationships with our companies throughout their life circle.

At the moment the pushes in the polls of deciding to go public in general, I mean I cast my mind back to when arm first went public back in the nineties. There were a lot more companies that were public at that point. There's been this sort of desire to be away from the duties that you have to shareholder, the costs. How does it look as a company looking to go public at the moment?

Is it desire?

We would say so, and we do a lot of work.

With the SEC and advocacy work on behalf of our issuers really around that, because our objective is to keep We want high quality companies coming, but we want to focus on the issues that are really important and we want the cost to remain reasonable for companies.

To that end.

So when they're looking at compliance costs, they're looking at volatility more broadly in the market. You said that looks pretty good at the moment, vicks remaining low. What therefore could be the catalysts into twenty twenty four, When are we going to see windows open and closed?

You think, yeah, well, I think ARM is likely to open a window here, and I think a lot of companies are ready to go public. Q four will probably be a lot more interesting, and a lot of companies want to go in the first half of twenty four, really getting ahead of the election.

Okay, so there's sort of political risk within that at this moment, there's geopolitical risk and it's interesting that, of course ARM has expo exposure.

To China a head of global listings.

How are you seeing the overall pushes and pulls of the global narrative right now?

Yeah, Well, there's a lot of interest from global companies, a lot of interest from Chinese companies listening in the US, Latin America Emia. The market's really open in the United States and it's very recognized.

I mean, the LSE recognizes this at this moment because it was It's a bit of pill for the London Stock Exchange to swallow today that they didn't manage to woo on there, given it's a UK based company. But I'm interested. You say, China and companies still want to come here. Are they not worried in any way about the closing of investor base to China, particularly in this current political environment.

Yeah, I would just say it's a tricky time. But I think everyone recognizes that the US markets are the most liquid and everyone has to consider them when they're going public, regardless of where they are in the world.

When we're looking at the companies that could come after in the next week, all so the instacrats, the clear views, I'm interested in. What is the recipe is a company having to demonstrate profit growth, having to demonstrate revenue growth to be able to access the market right now?

I would say yes to both of those, and they also have to be priced at evaluation that accommodates for that growth or not. What about the overall desire?

It feels like of Masiyoshi's son himself not wanted to go to the very top of a range he could have done. Did that speak to wanting to ensure that this share pop and what is the perfect price point there for? How do you see that art rather than science.

I think his view is long term, right, It's the right thing to do for the long term, and I think you'll find that investors love to what we call it get a little bit of a kiss, and that not every dollar that could have been taken is taken by the company an ARM of course, is thinking about this for the long hole.

In many ways, ARM has gone against the grain. They've had a democratization of the banks in the way in which they've been underwritten. But they've also ensure that there are those lynchpin investors, the apples, are tsmcs, the intels who are brought up this stock. Does that make it a recipe for others to try and follow suit in that way? How difficult is it to replicate?

Well, there's a lot of different factors that go into a company's decision and how they put their book together, who their partners are. There's no one recipe that works for everybody, is what I would say. It really depends on the company, the advice that they're getting, and the decisions that they decide to make around that.

And interesting, of course, ARM is very much a B to B play. We're going to see some more B two C names. Retail investors become important At that moment we think back to the mean stock crazes and the heavy days of twenty twenty to one. Will the retail investor be is crucial going into this next era of IPO opening.

Yeah, I wouldn't say that they're crucial, but they What is important to recognize about the retail investor is they weren't an important part necessarily for a long period of time. They've become much more active, and I think it's exciting and it does democratize the process and everyone's able to participate, and so many more people got educated or took the time to get educated about the public markets and what that can really mean about your overall wealth.

Karen Snin has been so wonderful hosting us here. Thank you very much. Indeed, thank you. It's great to have me a VP who's head of global listings right here than Nasdac Shanani Thatti.

That's Bloomberg's Caroline hyd and Karen Snow, senior VP and global head of Listings at Nasdaq.

Thank you both.

Now let's turn to our own Bloomberg intelligence analyst, Kunjon Sabani for more on today's ARM listing. What's interesting to me is that if you look at the price indications at about fifty six dollars per share, that implies a valuation about sixty billion dollars dollar. Does ARM have a growth rate that justifies that type of a price tag.

Well, not in the near term, but definitely in the long term. The evaluation implies that investors are underwriting the long term growth that it is expected to achieve from the fast growing markets of data center, AI and automotive, but the company is just getting started.

For to scare the company, we actually are going to go to the ARM holding's actual price for a second before we get back to you on the valuation, because we are getting ARM trading live at fifty six dollars and ten cents a share, that is more than five dollars above its IPO price.

There is your IPO pop that you're seeing for ARM holdings.

Remember this is a fairly thin float that you were seeing for ARMS. So it did take a couple of hours to get the first trade moving for the underwriters and stabilization agent to.

Make sure that the book was built just in time.

And it is just about a smooth a day for an IPO in a year.

Where we've had virtually no IPOs.

At fifty six dollars and ten cents a share, you are looking at a company that is worth about sixty billion dollars. That is about fifty nine billion fifty nine point nine billion dollars in terms of valuation for ARM. We're going to turn out to Bloomberg's Abigail Doolittle to put this into perspective for us as we look for.

A landmark day this year for ARM and the IPO market.

Absolutely, Shanali and we do have a nice pop here for ARM right now trading higher by about nine point

Into next year twenty twenty four?

Is it going to create what investors, companies, bankers want to see relative to having the confidence that big, some big tech IPOs can go. Of course, we've had the setting over the last twelve months so of rise and rates inflation that makes some of these growth stocks riskier IPOs maybe less attractive. So again, right now we are looking at a positive opening here for arm holdings up nine point eight percent, an impressive IPO start right here on.

The day, certainly about ten percent. That is a very healthy little pop you get there from the lights of Golden and JP Morgan Mazoojo Hall underwriting the deal alongside Barclays and the twenty some other banks involved in the deal.

What does that mean to you?

I mean, this is definitely in the premium and along with the semi design ippers and sort of the AI companies like in media. Like I was saying, it seems the investors are underwriting the future growth coming from these markets rather than the current revenue composition, which is heavily based on smartphone and consumer electronics.

It's also a good day. Let's talk about that. It's a good day in the Market's Kanjohn, And so they're getting a little lucky here. They have relative calm. There was no crazy CPI print yesterday. Retail sales kept the market relatively calm.

The vix is low. But there are a lot of risks on the horizon.

If you are a new investor looking to arm, what are those risks that you should really be aware of impacting this valuation that we see today.

Yeah, so in the near term, like I said, because the revenue composition is heavily relied on the smartphone, and we know that smartphone Michael's market is going through a slump right now, So as they come out for the near term quarters. You know, investors will have to be patient and face for some hurdles coming in the near term because those data center revenues will take time to become a significant portion of the total revenue. And the

Themselves for all or nothing. Feels a little risky.

But at the same time, here when you think about the long term, you've said that a couple of times. Now, how long is the long term? When do investors have to be patient until.

I think like at least about three years. I mean today when we look at the server market specifically, their market share is in mid single digits, and in automotive it's again low double digits. We expect it to almost double in three to five years. And these markets are large. So even if you get a small pie of like said data center AI market, that's still adding revenue north of billions of dollars to a company which is almost doing close to less than three billion last year.

When you think about the competitive landscape at this point, you have an arm now in public markets softmake at some point we'll look to sell more shares. How do you expect them to stack up against their competitive set when it comes to how investors will put money to work in the sector.

Yeah, I mean I think they need to continue executing on the promise that they would have delivered for that ramp and the roadshow presentation. So investors are going to be keeping key e on how they're doing in the data center in the automotive market. So any accelerated growth design wins there should be a tailwind for them how it had been in absence of that.

That's Bloomberg Intelligence and Analysts Kunjohn Sovanni, thank you so much for your time. We're going to head back down to the NASDAC now where Bloomberg's Caroline Hyde is getting all the latest details. But Caroline, before those details, what's the mood. It must feel pretty good to be watching an ipo pop after such a big.

Drought, Shanali.

The relief, the optimism, cautious optimism. I mean, now that they've seen this trade exit behind me, we're currently training up more than thirteen percent. It was this art and science balance that everyone has to remind themselves of. It takes a while to ensure that they've got the right

To see a ten percent pop. Rather, it looks a lot better here than an eight percent pop would. Do you think this conservatism that they've took in their underwriting approach to the IPO price last night is what's going to be the name of the game for the companies coming up.

That's what's so interesting is this idiosyncratic is this massa head of soft pank who apparently we understand due to our reporting, really took some charge in this deciding that they weren't going to go for the fifty two dollars, they were going to stick to fifty one to ensure that they got that really good gauge of sentiment. He is a long term holder of this stock. He said that time and time again. Yes, he wants to see that some valuation increase in the near term, but in

People who are.

Waiting for this IPO window to open, and they want to see it continue to be open until as we had Karen Snowsey before the elections of next year.

Bloomberg's Caroline Hyde, we thank you so very much for all your time and what perfect timing we have had you at the top of the show while the stock

Sure, yeah, so I think you know, this is obviously a positive sign for tech broadly. You know, we have Claview coming up next week, We have Instacart coming up next week, and so we want to see public investors or they want to see public investors with enthusiasm for tech stocks. I would say that a ten percent pop isn't a big pop. I mean, I mean typically you would see twenty to thirty percent pop on day one.

What about the approach.

We're talking a little bit about pricing, but what about ownership. In this instance, SoftBank is only floating about ten percent in the last twenty four hours. A lot of agitas about there. It's about vcs holding on too long into an ipo. Investors want their money back. So do you expect more investors to start doing that?

Yeah, sometimes we've seen this.

You know, it's called a low float IPO, where you just take a a small percentage of the company and release it to the public. And that is actually often designed help ensure a better pop because you know, if you limit supply, then it can kind of artificially raise demand,

Katie, I've got to say, it's so nice to have you in New York for a big listening in New York from an international company. But also I know that you've been kind of running around doing a lot of report. I got to do a little bit of the reporting with you. What's the new name of the game. It's not just about profitability, is it? When we think about the companies that are looking to list, and the window doesn't seem to be as open as people think it is.

Yeah, that's a big question on everyone's minds right now because vcs tend.

To be growth investors.

They really look at companies with top line revenue growth, and that was what public investors see to be interested in a couple of years ago, but then there's been a perception that that changed and that they care more about profitability. But vcs will tell you that that's at odds with growth because if you have to cut you know, your sales and marketing to be profitable, then that will.

Reduce your growth rates.

And so we see with Instacart that they are profitable in line with what the perception of what tech public investors want, but they have had slowed growth, and so that's going to be one that people are watching. You have Klavio, on the other hand, where they're both growing and profitable, so we'll see.

How do you think about the next week ahead.

Obviously the bankers are going to be very busy on roadshows for both of these companies.

What's the timeline?

Yeah, so, I mean right now we have the roadshows for Instacart and Clavio underway, and they're both scheduled to go next week around the same time.

So another thing also that has just happened is Data Bricks raising more money at a forty three billion dollars evaluation.

I believe.

What does this mean because you saw other companies kind of raise money pre ipo, does it change the pre I pipo appetite as well?

Yeah, so, a lot of companies other than AI companies, pretty much no one has been able to raise a high valuations or at least even flat valuations in the last year or so.

There's been very very few.

Data Breaks is a company that has a lot of investor interest, so even though the price is already high.

They've been able to sustain that.

Typically, when I see a company like this raising money, I think they're not on the verge of IPO. I mean, certainly they could go public in the next year, but you wouldn't want to dilute your ownership in the next few months before an IPO unless we're going to do.

A direct listing that is Bloomberg's Katie Roof. We thank you so very much for your time. We want to give you an update as well on where ARM is trading. We are looking at that IPO pop still holding.

Now.

Listen, remember this has been rising as much as fifteen percent. We are seeing some of those gains a little bit volatile, but remember we did see initially that pop of about ten percent. If you take a look at trading now, we are looking at a stock now very much up more.

Than sixty dollars a share.

This was a stock that was priced at fifty one dollars. It was a Masa son that himself told the bankers that he wanted to keep this more conservatively priced. They tried to bring it up about a dollar to fifty two dollars a share. But bringing it down has not only given it an initial pop, it is a little more than what it would have been if they priced it higher. Now remember also to the point that our

About the valuation itself.

So you know what, this is something that is stopped sacking up for a win for the underwriters and certainly for soft Bank. Now let's get more contacts from Bloomberg's Ian King.

Ian.

When you take a look at the competitive dynamics that ARM is facing, why do you think that it is getting such a warm reaction in public markets.

Well, I mean, there are a couple of things going on, Sonali. There are the set of the mechanics of the IPO itself. Remember this is just a very small portion of the company that's being offered. There are strategic investors already involved, so there's relatively little kind of supply here in terms of the supply demand balance on the stock. But on the flip side of it, we're also IPO and at a time when people are very interested in semiconductor shares.

What about the.

Competitive dynamics, given that they're getting such a warm reaction today, do you think that this is excitement around the new kid on the block, or is this an idea that we'll keep sending the other shares higher as well.

I mean, it's a yes and no to that. They're really not the new kid on the block. Everybody knows about They've been around a long time. Their technology is pretty much everywhere. It's used by all of the major tip makers. At the same time, they are pitching themselves a different company that does way more than just sell the bare bones of the IP that goes into these chips. You know, they're selling themselves as being much more comprehensive company and having access to higher profit margins.

Quickly in here, what about the soft Bank ownership, Given they've only floated about ten percent, they will sell more eventually over time, But the governance all points to soft Bank.

Is that a plus or a minus?

It's a variable. I think that's the way to describe it. Obviously, soft Bank will do what Soft Bank does in terms of maximizing its profits down the line. It's an investor, it's as much as it is a technology company. So that's definitely an overhanger or a consideration on armed But at the same time it also gives them perhaps some latitude that other publicly traded companies might not have.

Our thanks to Bloomberg's Ian King.

We want to touch back in one more time here on ARMS share before we had to commercial break, because we are looking at that i IPO pop. Not only is the IPO market back, it is back in time for cooler markets. When we're looking at sixty one dollars a share here, we are looking at a price here that is almost twenty percent now more than what we initially had come to price at just last night. Now,

A couple of weeks ago. This is Bloomberg.

Welcome back to Bloomberg Technology. I'm Shinali Bask. We're going to look quickly at that arm ipo price once again. That first day of trading, you're getting that IPO pop. You're getting almost a twenty percent pop in the first day of trading so far, that is about sixty dollars a share, and it is up immediately from the fifty one at priced at at more than sixty billion dollars in valuation. You are getting a price very near what

Of the companies that can finally make it back to market next?

Sorry, sorry about that, hey.

Aja, Actually we are gonna get right back to you, because we are standing by with a pretty key guest.

For a day like today.

That is ARM CEO.

Rene Has with our own Caroline Hide, Caroline and Ali.

It is great to be here with Renee, the CEO of ARM. It is your day and they talk to us about the amount of emails, phone calls, text messages, celebrations, the Cambridge part of your company going berserk.

How does it feel?

Oh gosh, what an exciting day. You know, I'm hearing from high school friends. I have not talked to in a long time. Who are saying you never told me? I think as we were watching this on TV. But most of all, I'm so thrilled for the employees of ARM, thirty three year old company, great heritage, but watching all the employees in Cambridge celebrate simultaneously that was that was magical.

And they might continue to celebrate as we see what seventeen eighteen percent increase. How has that journey of going out to investors the road show, the story that you've been able seemingly to successfully sell, the fact that you're trading well on this day. What was the vision they wanted to hear?

Revenue growth?

I hear of eleven percent up to twenty five percent in the next couple of years.

What drives you?

I think it was a great process. Investors really wanted to understand the opportunity we had in front of us, and of course AI, which you can't really talk about our industry without talking about AI. And I think helping them understand that you can't really run AI without ARM, without a CPU, and just pointing out to them that it's in everywhere, in every device that people touch, was a big part of the process for us.

Because everyone has made the equivalent of your smartphone. It's completely absorbed, more than ninety percent of phones is where your CPUs are. But the design, the fact that you now want to be integral to data centers, and they're like, how certain are you on the revenue vision, on the profitability vision, even though we see concerns about macro environment still and whether or not we're in an AI hype cycle.

Yeah, so AI is everywhere, and if it's your edge device like the Assistant or the Alexa or your autonomous vehicle, that's all AI. And now we're seeing it in the cloud, in the data center and all the growth with Nvidia in VideA announcing one of their newest products, grace Hopper, that is based on ARM. So ARM is everywhere relative to AI. We also have a very unique business model that gives us the ability to have a very very good vision in the future in terms of when people

How Ward, were investeds about China and your exposure.

I think there were a lot of questions as you can imagine about China in general, given all the geopolitics, our business there looks a lot like the rest of the world. We have great growth in the data center, we have great growth in automotive. China's huge on electric vehicles, so it's been terrific there for us. I have the same kind of headaches that every other tech CEO has regarding how to navigate through this, but no different.

Do you think there will be more pressure now that you're public again?

Ultimately?

I mean you came to ARM in twenty thirteen, you were listed at that point, but it's not Bean Sin's twenty sixteen that you have been How does the game change as a leader of that business now?

Yeah, I think there's some things that we were able to do as a private company that will just be different. Right, quarterly earnings, making sure that we hit all our commitments. But ARM is not a business you measure from quarter to quarter. Measure us over years and decades, and the long term vision is something that I am very, very passionate about, and we'll continue to drive the company the same way private or public.

You have a lot of key vested interests, whether they be your clients, APPLETSMC and TELL taking big stakes in the company today? How important are those voices? Visa the masses, the head of soft Bank. I'm sure you're on the phone too daily.

Yeah. So one of the challenges of our industry I'm familiar with ARM, is that the fact that we're everywhere. None of this works unless we play nice with others. So we have to have a lot of engagement with strategic partners and making sure that we're managing that balance, including Masa, our chief shareholder.

Do you think he lets more of ARM become public? Is that something you'd like.

To see you now?

Massa and I talk quite frequently, but it's really not about the day to day. It's about the long term vision, the passion that he and I have about the future and really about what this company can be long term. So I don't expect that to change being a public company.

Do you think you go public in the UK? I'm sure it's been a bit of sweet for the London Stuff Exchange today.

Yeah.

So today obviously we're in New York, but we're incredibly proud of our UK heritage and we are opening to considering that down the road.

Okay, any sort of timeframe for that.

None that we can talk about today. I'm trying to get through today.

A little bit well before you get through today. In that respect, investors do love all things regarding artificial intelligence, But how have you managed to land that your story is different? People have been so exuberant about Nvidia, where you used to work, but they're really exuberant about GPUs. How have you said that you are able to claim a larger royalty share of how AI continues to be said?

Yeah, So one of the benefits of the road show was spending a lot of time with investors talking about AI and where we fit. And I think one of the misconceptions is that a GPU can run without a CPU, which is just not the case. The CPU is central to every electronics device and there are devices that ship

There has been this moment though, at which we're trying to understand how the landscape works with global demand and that translating into revenue. When you think of Oracle's numbers that came in and look, they delivered thirty percent increase when it comes to their cloud provision and their AI bet, but it doesn't always immediately turn into revenue in the here and the now. How convinced are you that it is going to be in the bottom line evident in the next coming quarters.

As far as AI, oh, I think it's un questionable that AI, which has already been here right for a number of years, the chat CHEPD moment taught us that, oh my gosh, the capability of what this can do going forward has gone up a level. And I think

And it seems as though you're integral to SoftBank's vision of AI and Massa's vision of AI. How can you announce it a little bit? You say, talking to him daily, what his vision of ARM within the ecosystem going forward really is?

He and I share a very same view that ARM is one of the most important technology companies in our industry, foundational if you will, and I would like to see us over the next five to ten years really be recognized that way, and he and I are very aligned on that. As you can imagine when you think about five to ten years out, there's a lot of things to talk about in terms of the art of the possible, but that's really where he's focused on when his conversation with me.

Long term thinking but then near term action. We understand he was pretty integral to calling the shots on price points for today's listing. How was that as just an IPO experience? Did he end up being like, no, we need to leave a little bit of money on the table. This needs to be a successful trade.

But all I can say is. This is my first road show, so everything was altering experience. We wanted to be at the high end of the range that we set forty seven to fifty one, and that's where it ended up. So we're happy.

We're very thrilled with today.

You said that school friends are going to in touch can why have you been hiding this from them? How do you feel differently now as a CEO of a publicly traded company? Do you feel differently today?

I feel a little bit differently, and looking ahead at this number than what the share price is, that wasn't something we looked at before. But you know again when and I told this to employees. While the IPO is amazing and I could not be more proud of it, I am far more excited about the next five to ten years and that's where my head is focused. Obviously we needed things as a public company CEO, but I don't feel too much different.

And sometimes these are marketing exercises.

Armor is B to B.

But do you think you've become more relevant B to see now you're saying how people had no idea all this because largely people don't realize that every day they are interacting with your designs with your blueprints.

The people who need to know what we do do know obviously, just giving the fact that all the global partners that we work with going forward, how to market ourselves as the public company. That's one of the things as a public company CEO I'll spend some time thinking about. But right now we're just kind of focused on today and what that means.

And meanwhile, within this exuberance of today, yesterday we saw basically every key chief executive of an AI company, AI related company, indoors and a closed hearing with Senate Majority Leader Chuck Schumer. Can you tell us about regulation? How do you see the landscape evolving to ensure that you can harness that AI moment.

I think it's one of those areas that is an unknown moment. And I remember talking to an executive about the analogy or metaphor we used was when cars were invented, you didn't have driver's licenses, you didn't have lanes, you

Is the US leading the charge and regulation?

Is Europe?

Is the UK was getting it right?

From your perspective, I think all the governments are trying to figure it out. I know the EU has spent a lot of energy on this, as had the UK. So in terms of who's getting it right, I think it's still early days and everyone's really just trying to learn how technology and this new powerful algorithm will work together.

Keep teaching us. Great to have some time with you.

Thank you so much.

Across the CEO of ARM the day of their listing, I'm looking at the price point. I'm seventeen percent headipop for the day's trading.

Sanali absolutely, Caroline and Renee has armed CEO first roadshow.

Thank you very much for your time.

Now let's bring in Aja Shah, Deutsche Bank's managing director and co head of Technology, Media and Telecommunications for Deutsche Bank, one of the end writers.

As we've been talking about, you know, at first.

One would to react here to what Renee had to say, because he did talk about this idea that people will pay for AI related stocks and companies eventually. But we are in a different era than that hypergrowth, unprofitable type of company. You had a profit at ARM, it was slowing. What is investor appetite for anything but upward trajectory?

Yeah, thanks for having me on the show.

Look, you know, we have we have definitely seen an increase in activity on the on the capital market side, certainly post Labor Day. You know, there was a lot ofventive demand and expectation that the markets would open and armwouldn't need to open the market to the i P as you've seen the obviously the i PO has done very well so far, and and ARM is really a play on interesting demand for advanced processing needed to support AI.

Yet to come right on that pipeline. The reality is there's not that much time left in the year. You really have to file pretty soon if you're going to go public. So is the pipeline into next year much bigger? Is it still quite muted given the dynamics we're seeing in the market. There's still a lot of macro uncertainties out there.

Sure, the pipeline is is big, and it is getting bigger by the day. Obviously, with ARMS successful IPO, I think you'll see a lot more companies come to market, certainly between now and the end of the year and getting.

Up for next year.

We're seeing you know, all across the tech ecosystem. You know, on the on the internet side, there are companies like Reddit or two ro Go Pop. In fintech, we've seen, you know, expectations around Stripe and Plaid. On the software side, you know you've Genesis, You've got UKG, Rubric and others. And even on the semiconductor space, after you know Armed success, there are companies that you know, we're certainly like to access the market, companies like an mpror Steri Labs and others.

Is there a playbook here?

On one hand, you did see them kind of tamper down expectations in.

Order to get this smooth debut.

On the other hand, there's a cross current that seems to be picking its head up in the market, which is M and A. Is there a reality that MNA can meaningfully compete with the I P O markets?

And what will give a company about our ex evaluation?

Yeah, so the M and A market has has slowed down this year relative two years past. And you know, with with the IPO market you know, showing signs of opening, uh, that is a real competition to you know, companies looking to acquire. So I do see the opportunity for MNA also to increase going forward. Again, not just because the IPEO market is strong, but also valuations are you know increasing, They're stronger than what they were last year.

We've seen you know, SMP of seventeen percent, nas.

Tap up thirty two percent, the Vicks Volatility Index is down forty percent, and so I think those are factors that certainly corporates look at when they think about MNA. And now there is a real option for companies to go public, So we do expect companies to start, you know, looking at more corporate am and if we've seen some financial sponsors and private equity deals happen in the market,

A market also to pick up pretty martially in the next year.

Also think about here is that this is not a US based company but listed in the United States now are you scouring the globe for hopeful.

Is just given that valuation.

Might be more reasonable outside of the United States.

Absolutely, there are you know, several companies obviously in Asia and.

Europe that have been waiting.

For ARM and a few other IPOs that will come out between now and the end of the year, and we will see increase in certainly either cross border listings or just listing in Europe and Asia. But we are working with a handful of companies that are looking to go public, you know, across both sides of the of the continent.

That is Aj Shah.

He's managing director and co head of TMT for Deutsche Bank's investment banks. Thank you very much for your time now joining us here in studios. Cameron, I'm sorry he's headlined Venture Capital Partner for his read on the IPO landscape and other paths to exit. We've been talking here about IPOs versus M and A. There's another question I wanted to ask you, though there's been a lot of fireworks.

About this idea of VC's holding on too long.

When you go into public markets, how do you see that playing. Do you think that there will be more willingness to start to sell into an IPO rather than hold on and clip the games over time.

Yeah, I mean, I think that you're going to see in their arm case, you really only have one seller, which is soft Bank, and it's not a traditional venture backed IPO though the way they might consider you, SoftBank take a private seven years ago and is bringing it back out now today.

We have a couple other companies.

Coming up this week or the next ten days, Claveyo and Instacart, which are both venture backed startups quote unquote in the traditional sense, and I think in both those cases you'll see the venture investors selling into the IPO in a meaningful way. But it's also going to be a liquidity event for the company and the employees as well as a fundraising event. Right It's an event for the company to actually raise funds and capital so they can show up the balance sheet as well.

It's been a bit of a strange year when you think about the hopefuls and companies that are going public.

There is some hope around fintech.

There's a lot of consumer there's a lot of food and delivery, But how much is AI the real silver bullet. Do you think that it's a red herring or do you think that there's more opportunity else well, arm.

Is one of the only playees right now for consumers and retail investors as well as investors generally to play into the AI kind of theme. Other than maybe owning Microsoft as that passed through to open ai or Google as have passed through to Bard or in vidio. Right there really aren't many public opportunities to play the kind

Some I think Stripe is going to be the big bell weather, but that's not likely.

To happen when you think it actually goes.

Who knows, right, they raised the massive fundraising round very recently at a steep discount, about a fifty percent discount. They were previously priced at ninety five billion. They raised it about fifty billion to really shore up the balance sheet and also primarily to incentivize employees and keep them around because of a stock option plan that was expiring. So with that fundraise, I think they have a lot

Now, you think about Instacart, and it is a big win for some of the early investors, including D one where D one Dan Sundeim for example, they had a roughly sixty percent of their assets invested in venture.

Capital and private equity. It's been a drag on returns.

When you look at those crossover funds, those big hedge funds that have come into the market, what role do you think that they play, not that they're finally starting to exit a little.

More well going forward, and really this year it's been very quiet with those guys. You know, we used to see Tiger and ko Tu and soft Bank and a lot of these funds coming into earlier stage opportunities in the venture space, sometimes even like seed deals, which is

You have traditional venture firms in there as.

Well that'll be looking to hopefully, you know, I think get out as part of the IPO.

Now as they get out, how do you think that changes the dynamic around valuations given we've seen so many down rounds already this year, Well.

It's you know, it's been a market reset, right And in the case of instat cart, I think the last private round was in the thirty nine billion range. I think they've priced it very attractively, frankly at nine billion, which is actually if you look at the comp which is door Dash, which trades it four times revenue.

Instacart's around a three billion dollar revenue business.

So the fair price should probably be closer to eleven to twelve billion, So I think pricing it at nine leads room for upside.

But it's a.

Vast reset, right, and we've seen that with Stripe, with Klarna on in the private markets as well as in the public market scene.

Of the companies like like PayPal and.

Square Block, they're all down sixty seventy percent from their twenty twenty one highs.

I think that's consistent across the board.

You look at what you're seeing in ARM today, you're looking at almost a twenty percent pop, more than seventeen percent pop.

At the moment.

It has been trading in and around more than twenty times. It's trailing as sales. Do you look at these companies and say that's achievable or is that a one off?

I think ARM itself is really a one off in terms of the type of company. It is that again, the play on AI and the current moment, the size and scale the business, the partners they have. We have these very stable relationships with folks like Samsung and Google and Apple, so you know, at the same time it's a slow growth business and a high growth sector, right, They're not really growing right now. They've had kind of a flat last year and they're going to start to

It's no secret Birkenstocks is now my new IPO attire.

More than to work there, b Birkenstock WI would be a public stock.

Yeah, absolutely, the cameraon I'm sorry headline Benure partner. We thank you so very much for your time. Now let's take it home with Bloomberg's Caroline Hyde, who's been on the ground at NAZAC for us, looking at that fifteen percent or so pup at the arm IPO just right out.

Of the gate just about an hour ago. What's next?

Yeah, what's next? Trevio Instacart, all of the eyes on these companies coming next week, and they're going to be from the NASZAC, They're going to be from the New York Stock Exchange. There is going to continue to be an eye on really how this company continues to perform. We know that there's e xuberants around the first day of trade. How does ARM manage to continue this narrative

I think it's.

Also and the road for ARM and destiny really interesting that he told us that they are potentially yeing a UK listing, so a secondary listening at some point. That was news that they gave to us. So I think that's an important step in terms of reminding everyone this is a global company with global exposure but also a global headquarters. It's UK based. And then what for SoftBank? Of course, this is a company now that is trying to show that they're back winning when it comes to

Something I had heard him tell you and a haas was that this was his first road show. It's interesting because you think about the list of IPOs around the corner and the entrepreneurs that are trying to make it to market, and the role these underwriters play, some old, some new Goldman's big day, the fact that they're playing such a big role in the technology market. Mazouho just coming up swinging, not only in this IPO, but some of the ones.

Next week as well.

What did he tell you on the sidelines about what it felt like to be listing such a massive company in the market right now for the first time.

I mean, I do think he's trying to keep his his emotions contained. And look he was where he was telling us that friends that you knew since college were getting in touch, saying they had no idea. This is a B to B play less than an Instacart B two C. And I'm sore sure Fiji over at Instacart is getting a lot more friends who recognize she's about to have the slog to get this company to go

Instead, they're going.

To be basing their focus on retail investor. And of course that's why so interestingly Sofi is coming to play an underwriting role there. So I'm going to be interested as to how they sell that narrative, not just to the business population, but to the public.

Tootionally, right, Instacart would be Sofia's first underwritten IPO. Now, last question here for you, because down at the NASDAK you're also interviewing Nasdaq's executives direct listings. The business that includes listenings is about twenty percent of last year's total revenue. How do they feel about the market finally coming back?

Boyant, God, everyone I've spoken to has a smile.

On their face.

They look relatively exhausting to have not sleep slept for a few days, but they cannot wait for this really pendulum to swing back open. They've totally said Karen snow As you were referencing head of Global Listings saying that there is so many companies waiting to come out. One hundred and fifty seven of course have filed looking to really access this window. She feels it could shut by well the twenty twenty four elections. Many want to get

Yeah, that timeline certainly makes sense let alone, the October government shutdown, and a whole host of other potential things that could get in the way Bloomberg's Caroline had.

We thank you so very much.

For your time and your incredible interview is at a pretty pivotal moment watching that RM IPO Open Interviews just around that. Now, that does it for this edition of Bloomberg Technology, the IPO edition coming up next to you. Don't forget to check out that podcast. You can find it on the terminal. You could find it online as well as on Apple, Spotify, and iHeart this is Bloomberg