Speaker 1: From the heart where innovation, money and power collie in
Speaker 1: Silicon Valley n beyond. This is Bloomberg Technology with Caroline
Speaker 1: Hide and Ed Loudlow.
Speaker 2: I'm Shnalli Bassik at Bloomberg's world headquarters in New York.
Speaker 2: Ed Ludlow is off today and Caroline Hyde is live
Speaker 2: at the Nasdaq.
Speaker 3: This is Bloomberg Technology. Coming up.
Speaker 2: We are alive from NAZAK to bring you full coverage
Speaker 2: of the ARM IPO as it makes us trading debut
Speaker 2: as the biggest.
Speaker 3: IPO of the year.
Speaker 2: More ahead and as ARM makes his trading debut, will
Speaker 2: push ahead to the other companies lining up to go public.
Speaker 2: During our venture capital squadline, we'll also look at the
Speaker 2: prospects and use case for digital dollars with former head
Speaker 2: of the CFTC Chris John Carlow.
Speaker 3: All that and more coming up next.
Speaker 2: Now before we head over to the az DEC, we're
Speaker 2: Caroline hied Is standing by with a very senior executive.
Speaker 3: We are also.
Speaker 2: Getting indications that ARM may open shortly in the next
Speaker 2: ten to fifteen minutes. We are getting price indications of
Speaker 2: about fifty six dollars give or take fifty six thirty
Speaker 2: That would give the firm evaluation of about sixty billion dollars.
Speaker 3: Let's see where were head though, Caroline.
Speaker 2: We are heading over now to Caroline and Karen s
Speaker 2: Now Senior VP and Global head of Listings over at Nasdaq.
Speaker 4: Shanani, thank you so much, and yes I am sat
Speaker 4: here with Karen and wow, we're back at it.
Speaker 5: We've almost forgotten.
Speaker 6: How's IPA.
Speaker 7: It's very exciting.
Speaker 4: How important is this ARM listing for the rest of
Speaker 4: the companies that now stand to list. I think you
Speaker 4: were saying, what one hundred and fifty seven of their
Speaker 4: waiting to come to the market.
Speaker 7: It's important, it needs to trade well. I think that.
Speaker 8: This is a moment in time that everyone is really
Speaker 8: paying attention to. The markets have been open for great
Speaker 8: companies for some time now when you look at the
Speaker 8: VIX and the second market and what we're seeing in
Speaker 8: the private markets, but it's really been on the supply side,
Speaker 8: and ARM is really set to unlock that.
Speaker 4: What's so interesting about ARM is how idiosyncratic it is
Speaker 4: or not, because many want this to be a bell weather.
Speaker 4: It's in the tipping point of AI, also China or anxiety.
Speaker 4: But what's so interesting is it's only a little free
Speaker 4: flowt less than ten percent? How easy or heart is
Speaker 4: it therefore to square up demand as apply at this moment?
Speaker 4: Is anyone going to want to be a seller? What's
Speaker 4: happening behind the scenes.
Speaker 8: Yeah, well that is why it's taking a little bit
Speaker 8: of time to open. It's really important to get the
Speaker 8: opening cross right. And one of the things that we
Speaker 8: do is we provide technology to the person opening the stock,
Speaker 8: and that's JP Morgan.
Speaker 7: In this case. It's called a stabilization.
Speaker 8: Agent, and we've turned it into more of a science
Speaker 8: than an art. There still is an art, though, and
Speaker 8: you want enough buyers and sellers in that opening cross
Speaker 8: to price the opening at a level that it'll trade.
Speaker 4: Well when you have that sort of technology is that's
Speaker 4: what wooing the likes of arm the likes of instacart
Speaker 4: are looking to come with an ASDAC as well. How
Speaker 4: do you set yourself apart from some of the other
Speaker 4: exchanges in this moment right.
Speaker 7: Well, it is a part of it. I would say.
Speaker 8: We do find that the underwriters have more information and
Speaker 8: that's really helpful to them.
Speaker 7: But there are other factors.
Speaker 8: Obviously, I would say brand alignment is really important. The
Speaker 8: fact that we have owned and operate or differentiated services,
Speaker 8: So we really build relationships with our companies throughout their
Speaker 8: life circle.
Speaker 4: At the moment the pushes in the polls of deciding
Speaker 4: to go public in general, I mean I cast my
Speaker 4: mind back to when arm first went public back in
Speaker 4: the nineties. There were a lot more companies that were
Speaker 4: public at that point. There's been this sort of desire
Speaker 4: to be away from the duties that you have to shareholder,
Speaker 4: the costs. How does it look as a company looking
Speaker 4: to go public at the moment?
Speaker 3: Is it desire?
Speaker 7: We would say so, and we do a lot of work.
Speaker 8: With the SEC and advocacy work on behalf of our
Speaker 8: issuers really around that, because our objective is to keep
Speaker 8: We want high quality companies coming, but we want to
Speaker 8: focus on the issues that are really important and we
Speaker 8: want the cost to remain reasonable for companies.
Speaker 3: To that end.
Speaker 4: So when they're looking at compliance costs, they're looking at
Speaker 4: volatility more broadly in the market. You said that looks
Speaker 4: pretty good at the moment, vicks remaining low. What therefore
Speaker 4: could be the catalysts into twenty twenty four, When are
Speaker 4: we going to see windows open and closed?
Speaker 8: You think, yeah, well, I think ARM is likely to
Speaker 8: open a window here, and I think a lot of
Speaker 8: companies are ready to go public. Q four will probably
Speaker 8: be a lot more interesting, and a lot of companies
Speaker 8: want to go in the first half of twenty four,
Speaker 8: really getting ahead of the election.
Speaker 4: Okay, so there's sort of political risk within that at
Speaker 4: this moment, there's geopolitical risk and it's interesting that, of
Speaker 4: course ARM has expo exposure.
Speaker 7: To China a head of global listings.
Speaker 4: How are you seeing the overall pushes and pulls of
Speaker 4: the global narrative right now?
Speaker 8: Yeah, Well, there's a lot of interest from global companies,
Speaker 8: a lot of interest from Chinese companies listening in the US,
Speaker 8: Latin America Emia. The market's really open in the United
Speaker 8: States and it's very recognized.
Speaker 4: I mean, the LSE recognizes this at this moment because
Speaker 4: it was It's a bit of pill for the London
Speaker 4: Stock Exchange to swallow today that they didn't manage to
Speaker 4: woo on there, given it's a UK based company. But
Speaker 4: I'm interested. You say, China and companies still want to
Speaker 4: come here. Are they not worried in any way about
Speaker 4: the closing of investor base to China, particularly in this
Speaker 4: current political environment.
Speaker 8: Yeah, I would just say it's a tricky time. But
Speaker 8: I think everyone recognizes that the US markets are the
Speaker 8: most liquid and everyone has to consider them when they're
Speaker 8: going public, regardless of where they are in the world.
Speaker 4: When we're looking at the companies that could come after
Speaker 4: in the next week, all so the instacrats, the clear views,
Speaker 4: I'm interested in. What is the recipe is a company
Speaker 4: having to demonstrate profit growth, having to demonstrate revenue growth
Speaker 4: to be able to access the market right now?
Speaker 8: I would say yes to both of those, and they
Speaker 8: also have to be priced at evaluation that accommodates for
Speaker 8: that growth or not. What about the overall desire?
Speaker 4: It feels like of Masiyoshi's son himself not wanted to
Speaker 4: go to the very top of a range he could
Speaker 4: have done. Did that speak to wanting to ensure that
Speaker 4: this share pop and what is the perfect price point
Speaker 4: there for? How do you see that art rather than science.
Speaker 8: I think his view is long term, right, It's the
Speaker 8: right thing to do for the long term, and I
Speaker 8: think you'll find that investors love to what we call
Speaker 8: it get a little bit of a kiss, and that
Speaker 8: not every dollar that could have been taken is taken
Speaker 8: by the company an ARM of course, is thinking about
Speaker 8: this for the long hole.
Speaker 4: In many ways, ARM has gone against the grain. They've
Speaker 4: had a democratization of the banks in the way in
Speaker 4: which they've been underwritten. But they've also ensure that there
Speaker 4: are those lynchpin investors, the apples, are tsmcs, the intels
Speaker 4: who are brought up this stock. Does that make it
Speaker 4: a recipe for others to try and follow suit in
Speaker 4: that way? How difficult is it to replicate?
Speaker 8: Well, there's a lot of different factors that go into
Speaker 8: a company's decision and how they put their book together,
Speaker 8: who their partners are. There's no one recipe that works
Speaker 8: for everybody, is what I would say. It really depends
Speaker 8: on the company, the advice that they're getting, and the
Speaker 8: decisions that they decide to make around that.
Speaker 4: And interesting, of course, ARM is very much a B
Speaker 4: to B play. We're going to see some more B
Speaker 4: two C names. Retail investors become important At that moment
Speaker 4: we think back to the mean stock crazes and the
Speaker 4: heavy days of twenty twenty to one. Will the retail
Speaker 4: investor be is crucial going into this next era of
Speaker 4: IPO opening.
Speaker 8: Yeah, I wouldn't say that they're crucial, but they What
Speaker 8: is important to recognize about the retail investor is they
Speaker 8: weren't an important part necessarily for a long period of time.
Speaker 8: They've become much more active, and I think it's exciting
Speaker 8: and it does democratize the process and everyone's able to participate,
Speaker 8: and so many more people got educated or took the
Speaker 8: time to get educated about the public markets and what
Speaker 8: that can really mean about your overall wealth.
Speaker 4: Karen Snin has been so wonderful hosting us here. Thank
Speaker 4: you very much. Indeed, thank you. It's great to have
Speaker 4: me a VP who's head of global listings right here
Speaker 4: than Nasdac Shanani Thatti.
Speaker 2: That's Bloomberg's Caroline hyd and Karen Snow, senior VP and
Speaker 2: global head of Listings at Nasdaq.
Speaker 3: Thank you both.
Speaker 2: Now let's turn to our own Bloomberg intelligence analyst, Kunjon
Speaker 2: Sabani for more on today's ARM listing. What's interesting to
Speaker 2: me is that if you look at the price indications
Speaker 2: at about fifty six dollars per share, that implies a
Speaker 2: valuation about sixty billion dollars dollar. Does ARM have a
Speaker 2: growth rate that justifies that type of a price tag.
Speaker 9: Well, not in the near term, but definitely in the
Speaker 9: long term. The evaluation implies that investors are underwriting the
Speaker 9: long term growth that it is expected to achieve from
Speaker 9: the fast growing markets of data center, AI and automotive,
Speaker 9: but the company is just getting started.
Speaker 2: For to scare the company, we actually are going to
Speaker 2: go to the ARM holding's actual price for a second
Speaker 2: before we get back to you on the valuation, because
Speaker 2: we are getting ARM trading live at fifty six dollars
Speaker 2: and ten cents a share, that is more than five
Speaker 2: dollars above its IPO price.
Speaker 3: There is your IPO pop that you're seeing for ARM holdings.
Speaker 2: Remember this is a fairly thin float that you were
Speaker 2: seeing for ARMS. So it did take a couple of
Speaker 2: hours to get the first trade moving for the underwriters
Speaker 2: and stabilization agent to.
Speaker 3: Make sure that the book was built just in time.
Speaker 2: And it is just about a smooth a day for
Speaker 2: an IPO in a year.
Speaker 3: Where we've had virtually no IPOs.
Speaker 2: At fifty six dollars and ten cents a share, you
Speaker 2: are looking at a company that is worth about sixty
Speaker 2: billion dollars. That is about fifty nine billion fifty nine
Speaker 2: point nine billion dollars in terms of valuation for ARM.
Speaker 2: We're going to turn out to Bloomberg's Abigail Doolittle to
Speaker 2: put this into perspective for us as we look for.
Speaker 3: A landmark day this year for ARM and the IPO market.
Speaker 10: Absolutely, Shanali and we do have a nice pop here
Speaker 10: for ARM right now trading higher by about nine point
Speaker 10: four percent. Of course, priced at fifty one dollars, there
Speaker 10: was the possibility that they were going to price it
Speaker 10: at fifty two, fifty three to fifty four dollars, but
Speaker 10: CEO Maciosa's son wanted to make sure that they weren't
Speaker 10: too greedy, and it seems like he and the bankers
Speaker 10: did a good job right now ten percent above raising
Speaker 10: the valuation on the actual IPO price at fifty one
Speaker 10: dollars at fifty four point five billion dollars, and of
Speaker 10: course this is the biggest IPO of the year. And
Speaker 10: the reason that matters is because back in last year
Speaker 10: there was rough one hundred and seventy nine billion dollars
Speaker 10: raised through the public markets. This year or the year
Speaker 10: prior to that, six hundred and thirty, there's been a
Speaker 10: drought this year, So the big question is is this
Speaker 10: IPO Will it stay successful through the close? Right now
Speaker 10: it looks very positive. Is it going to provide the
Speaker 10: support for Instacart next week along with clave Io and
Speaker 10: more importantly Shanale going.
Speaker 3: Into next year twenty twenty four?
Speaker 10: Is it going to create what investors, companies, bankers want
Speaker 10: to see relative to having the confidence that big, some
Speaker 10: big tech IPOs can go. Of course, we've had the
Speaker 10: setting over the last twelve months so of rise and
Speaker 10: rates inflation that makes some of these growth stocks riskier
Speaker 10: IPOs maybe less attractive. So again, right now we are
Speaker 10: looking at a positive opening here for arm holdings up
Speaker 10: nine point eight percent, an impressive IPO start right here on.
Speaker 2: The day, certainly about ten percent. That is a very
Speaker 2: healthy little pop you get there from the lights of
Speaker 2: Golden and JP Morgan Mazoojo Hall underwriting the deal alongside
Speaker 2: Barclays and the twenty some other banks involved in the deal.
Speaker 2: We're going to turn back now to Kunjohn's Kunjohn soa
Speaker 2: Bannie of Bloomberg Intelligence, to talk more about the evaluation here,
Speaker 2: because you are looking at a company at sixty billion
Speaker 2: dollars on its first day in public markets after its
Speaker 2: ownership of after its soft bank ownership, and that implies
Speaker 2: a twenty two point four times multiple two it's trailing sales.
Speaker 3: What does that mean to you?
Speaker 9: I mean, this is definitely in the premium and along
Speaker 9: with the semi design ippers and sort of the AI
Speaker 9: companies like in media. Like I was saying, it seems
Speaker 9: the investors are underwriting the future growth coming from these
Speaker 9: markets rather than the current revenue composition, which is heavily
Speaker 9: based on smartphone and consumer electronics.
Speaker 2: It's also a good day. Let's talk about that. It's
Speaker 2: a good day in the Market's Kanjohn, And so they're
Speaker 2: getting a little lucky here. They have relative calm. There
Speaker 2: was no crazy CPI print yesterday. Retail sales kept the
Speaker 2: market relatively calm.
Speaker 3: The vix is low. But there are a lot of
Speaker 3: risks on the horizon.
Speaker 2: If you are a new investor looking to arm, what
Speaker 2: are those risks that you should really be aware of
Speaker 2: impacting this valuation that we see today.
Speaker 9: Yeah, so in the near term, like I said, because
Speaker 9: the revenue composition is heavily relied on the smartphone, and
Speaker 9: we know that smartphone Michael's market is going through a
Speaker 9: slump right now, So as they come out for the
Speaker 9: near term quarters. You know, investors will have to be
Speaker 9: patient and face for some hurdles coming in the near
Speaker 9: term because those data center revenues will take time to
Speaker 9: become a significant portion of the total revenue. And the
Speaker 9: second key risk is China. From China, it's about two angles.
Speaker 9: One is the exposure and the concentration. I mean, they
Speaker 9: have twenty four percentage revenues coming from China, which is
Speaker 9: not a lot or not an outlier for any large
Speaker 9: semi company. I mean all of those have exposure in
Speaker 9: that range or even higher for a smartphone company. But
Speaker 9: the other key risk is concentration. So Armed China is
Speaker 9: their gateway to the entire China market. So every customer
Speaker 9: they sell what they want to sell in and now
Speaker 9: they have to go through this one entity. So if
Speaker 9: something were to really go south there, you're talking about
Speaker 9: cutting off the entier market. So that's the two risks
Speaker 9: investor needs to brace.
Speaker 3: Themselves for all or nothing. Feels a little risky.
Speaker 2: But at the same time, here when you think about
Speaker 2: the long term, you've said that a couple of times. Now,
Speaker 2: how long is the long term? When do investors have
Speaker 2: to be patient until.
Speaker 9: I think like at least about three years. I mean
Speaker 9: today when we look at the server market specifically, their
Speaker 9: market share is in mid single digits, and in automotive
Speaker 9: it's again low double digits. We expect it to almost
Speaker 9: double in three to five years. And these markets are large.
Speaker 9: So even if you get a small pie of like
Speaker 9: said data center AI market, that's still adding revenue north
Speaker 9: of billions of dollars to a company which is almost
Speaker 9: doing close to less than three billion last year.
Speaker 2: When you think about the competitive landscape at this point,
Speaker 2: you have an arm now in public markets softmake at
Speaker 2: some point we'll look to sell more shares. How do
Speaker 2: you expect them to stack up against their competitive set
Speaker 2: when it comes to how investors will put money to
Speaker 2: work in the sector.
Speaker 9: Yeah, I mean I think they need to continue executing
Speaker 9: on the promise that they would have delivered for that
Speaker 9: ramp and the roadshow presentation. So investors are going to
Speaker 9: be keeping key e on how they're doing in the
Speaker 9: data center in the automotive market. So any accelerated growth
Speaker 9: design wins there should be a tailwind for them how
Speaker 9: it had been in absence of that.
Speaker 2: That's Bloomberg Intelligence and Analysts Kunjohn Sovanni, thank you so
Speaker 2: much for your time. We're going to head back down
Speaker 2: to the NASDAC now where Bloomberg's Caroline Hyde is getting
Speaker 2: all the latest details. But Caroline, before those details, what's
Speaker 2: the mood. It must feel pretty good to be watching
Speaker 2: an ipo pop after such a big.
Speaker 6: Drought, Shanali.
Speaker 4: The relief, the optimism, cautious optimism. I mean, now that
Speaker 4: they've seen this trade exit behind me, we're currently training
Speaker 4: up more than thirteen percent. It was this art and
Speaker 4: science balance that everyone has to remind themselves of. It
Speaker 4: takes a while to ensure that they've got the right
Speaker 4: amount basically sellers in place. In this particular instance, the
Speaker 4: issue is is, of course they got what seven hundred
Speaker 4: million dollars being taken down by some really important investors
Speaker 4: who are basically customers Apple and Video, and they're like,
Speaker 4: but they've also got to ensure that some people are
Speaker 4: going to be putting the less than ten percent free
Speaker 4: float up for sale at this moment and locking in
Speaker 4: some of the profits. Now, it's been a big profit
Speaker 4: for SoftBank. You know that they've made about seventy percent
Speaker 4: on this particular purchase that they made of thirty two
Speaker 4: billion dollars for arm back in twenty sixteen. But this
Speaker 4: is so important for the sentiment of the market. The
Speaker 4: fact that they've managed to decide to go in lower
Speaker 4: fifty one dollars was just at the top of them range.
Speaker 4: They didn't get greedy, and they've decided to price it
Speaker 4: and put fifty six dollars therefore to allow it to
Speaker 4: continue to trade higher for the rest of the day.
Speaker 4: That's what instacart, that's what some of the other companies
Speaker 4: eyeing this market need.
Speaker 2: To see a ten percent pop. Rather, it looks a
Speaker 2: lot better here than an eight percent pop would. Do
Speaker 2: you think this conservatism that they've took in their underwriting
Speaker 2: approach to the IPO price last night is what's going
Speaker 2: to be the name of the game for the companies
Speaker 2: coming up.
Speaker 4: That's what's so interesting is this idiosyncratic is this massa
Speaker 4: head of soft pank who apparently we understand due to
Speaker 4: our reporting, really took some charge in this deciding that
Speaker 4: they weren't going to go for the fifty two dollars,
Speaker 4: they were going to stick to fifty one to ensure
Speaker 4: that they got that really good gauge of sentiment. He
Speaker 4: is a long term holder of this stock. He said
Speaker 4: that time and time again. Yes, he wants to see
Speaker 4: that some valuation increase in the near term, but in
Speaker 4: the longer term too. Maybe, as you were just mentioning
Speaker 4: with a previous guest, maybe he offloads more stop. Maybe
Speaker 4: he uses it as collateral for further financial engineering that
Speaker 4: we know that he is so artful at and I
Speaker 4: think that we will see the likes of Instacart and
Speaker 4: some of the other companies eyeing having to decide whether
Speaker 4: or not they want to take long term perspective leave
Speaker 4: a little bit of money on the table to ensure
Speaker 4: that their company comes with a good set of pop
Speaker 4: into the market that then continues to have that demand side.
Speaker 4: We know that there's loads of concerns, geopolitical risks being
Speaker 4: one of them, anxiety around interest rates. This has been
Speaker 4: a volatile market for a long time.
Speaker 5: People who are.
Speaker 4: Waiting for this IPO window to open, and they want
Speaker 4: to see it continue to be open until as we
Speaker 4: had Karen Snowsey before the elections of next year.
Speaker 2: Bloomberg's Caroline Hyde, we thank you so very much for
Speaker 2: all your time and what perfect timing we have had
Speaker 2: you at the top of the show while the stock
Speaker 2: has opened. Now let's continue the conversation on venture capital
Speaker 2: and bring in Bloomberg's Katie Roof, because what a win
Speaker 2: for stopping They needed a win, and so then having
Speaker 2: this on the books, now, what does it mean for
Speaker 2: not only their portfolio company, but also the appetite for
Speaker 2: other vcs who are now looking to get some money
Speaker 2: back on the table for themselves.
Speaker 11: Sure, yeah, so I think you know, this is obviously
Speaker 11: a positive sign for tech broadly. You know, we have
Speaker 11: Claview coming up next week, We have Instacart coming up
Speaker 11: next week, and so we want to see public investors
Speaker 11: or they want to see public investors with enthusiasm for
Speaker 11: tech stocks. I would say that a ten percent pop
Speaker 11: isn't a big pop. I mean, I mean typically you
Speaker 11: would see twenty to thirty percent pop on day one.
Speaker 11: I mean, there have been times that it's gone higher,
Speaker 11: but usually the goal is a little bit higher than
Speaker 11: ten percent. But you know, the fact that it went
Speaker 11: up is good because there aren't a lot of tech
Speaker 11: stocks that have gone up in the last eighteen months.
Speaker 11: This is the only big tech IPO we've had since
Speaker 11: twenty twenty one, so people are watching this one closely,
Speaker 11: even though it is a pretty different sector than a
Speaker 11: lot of the other tech companies and certainly the venture
Speaker 11: back companies.
Speaker 3: What about the approach.
Speaker 2: We're talking a little bit about pricing, but what about ownership.
Speaker 2: In this instance, SoftBank is only floating about ten percent
Speaker 2: in the last twenty four hours. A lot of agitas
Speaker 2: about there. It's about vcs holding on too long into
Speaker 2: an ipo. Investors want their money back. So do you
Speaker 2: expect more investors to start doing that?
Speaker 6: Yeah, sometimes we've seen this.
Speaker 11: You know, it's called a low float IPO, where you
Speaker 11: just take a a small percentage of the company and
Speaker 11: release it to the public. And that is actually often
Speaker 11: designed help ensure a better pop because you know, if
Speaker 11: you limit supply, then it can kind of artificially raise demand,
Speaker 11: and so we've seen that in the past. I think
Speaker 11: that right now, certainly most tech companies would probably be
Speaker 11: wise to price these things conservatively, or at least that's
Speaker 11: what people are telling me, because yeah, you know, it
Speaker 11: can if you make a bad first impression on the market,
Speaker 11: it can spook investors in the long run.
Speaker 2: Katie, I've got to say, it's so nice to have
Speaker 2: you in New York for a big listening in New
Speaker 2: York from an international company. But also I know that
Speaker 2: you've been kind of running around doing a lot of report.
Speaker 2: I got to do a little bit of the reporting
Speaker 2: with you. What's the new name of the game. It's
Speaker 2: not just about profitability, is it? When we think about
Speaker 2: the companies that are looking to list, and the window
Speaker 2: doesn't seem to be as open as people think it is.
Speaker 11: Yeah, that's a big question on everyone's minds right now
Speaker 11: because vcs tend.
Speaker 6: To be growth investors.
Speaker 11: They really look at companies with top line revenue growth,
Speaker 11: and that was what public investors see to be interested
Speaker 11: in a couple of years ago, but then there's been
Speaker 11: a perception that that changed and that they care more
Speaker 11: about profitability. But vcs will tell you that that's at
Speaker 11: odds with growth because if you have to cut you know,
Speaker 11: your sales and marketing to be profitable, then that will.
Speaker 6: Reduce your growth rates.
Speaker 11: And so we see with Instacart that they are profitable
Speaker 11: in line with what the perception of what tech public
Speaker 11: investors want, but they have had slowed growth, and so
Speaker 11: that's going to be one that people are watching. You
Speaker 11: have Klavio, on the other hand, where they're both growing
Speaker 11: and profitable, so we'll see.
Speaker 3: How do you think about the next week ahead.
Speaker 2: Obviously the bankers are going to be very busy on
Speaker 2: roadshows for both of these companies.
Speaker 3: What's the timeline?
Speaker 11: Yeah, so, I mean right now we have the roadshows
Speaker 11: for Instacart and Clavio underway, and they're both scheduled to
Speaker 11: go next week around the same time.
Speaker 2: So another thing also that has just happened is Data
Speaker 2: Bricks raising more money at a forty three billion dollars evaluation.
Speaker 3: I believe.
Speaker 2: What does this mean because you saw other companies kind
Speaker 2: of raise money pre ipo, does it change the pre
Speaker 2: I pipo appetite as well?
Speaker 11: Yeah, so, a lot of companies other than AI companies,
Speaker 11: pretty much no one has been able to raise a
Speaker 11: high valuations or at least even flat valuations in the
Speaker 11: last year or so.
Speaker 6: There's been very very few.
Speaker 11: Data Breaks is a company that has a lot of
Speaker 11: investor interest, so even though the price is already high.
Speaker 6: They've been able to sustain that.
Speaker 11: Typically, when I see a company like this raising money,
Speaker 11: I think they're not on the verge of IPO. I mean,
Speaker 11: certainly they could go public in the next year, but
Speaker 11: you wouldn't want to dilute your ownership in the next
Speaker 11: few months before an IPO unless we're going to do.
Speaker 2: A direct listing that is Bloomberg's Katie Roof. We thank
Speaker 2: you so very much for your time. We want to
Speaker 2: give you an update as well on where ARM is trading.
Speaker 2: We are looking at that IPO pop still holding.
Speaker 3: Now.
Speaker 2: Listen, remember this has been rising as much as fifteen percent.
Speaker 2: We are seeing some of those gains a little bit volatile,
Speaker 2: but remember we did see initially that pop of about
Speaker 2: ten percent. If you take a look at trading now,
Speaker 2: we are looking at a stock now very much up more.
Speaker 3: Than sixty dollars a share.
Speaker 2: This was a stock that was priced at fifty one dollars.
Speaker 2: It was a Masa son that himself told the bankers
Speaker 2: that he wanted to keep this more conservatively priced. They
Speaker 2: tried to bring it up about a dollar to fifty
Speaker 2: two dollars a share. But bringing it down has not
Speaker 2: only given it an initial pop, it is a little
Speaker 2: more than what it would have been if they priced
Speaker 2: it higher. Now remember also to the point that our
Speaker 2: own Katie Roof was making. There have certainly been bigger
Speaker 2: pops in history but there were questions coming into this
Speaker 2: IPO from the beginning.
Speaker 3: About the valuation itself.
Speaker 2: So you know what, this is something that is stopped
Speaker 2: sacking up for a win for the underwriters and certainly
Speaker 2: for soft Bank. Now let's get more contacts from Bloomberg's
Speaker 2: Ian King.
Speaker 3: Ian.
Speaker 2: When you take a look at the competitive dynamics that
Speaker 2: ARM is facing, why do you think that it is
Speaker 2: getting such a warm reaction in public markets.
Speaker 12: Well, I mean, there are a couple of things going on, Sonali.
Speaker 12: There are the set of the mechanics of the IPO itself.
Speaker 12: Remember this is just a very small portion of the
Speaker 12: company that's being offered. There are strategic investors already involved,
Speaker 12: so there's relatively little kind of supply here in terms
Speaker 12: of the supply demand balance on the stock. But on
Speaker 12: the flip side of it, we're also IPO and at
Speaker 12: a time when people are very interested in semiconductor shares.
Speaker 12: You know, the Philadelphia semiconductor indexes up very strongly this year,
Speaker 12: and obviously everybody's very focused on the opportunity that AI
Speaker 12: is creating for these companies.
Speaker 3: What about the.
Speaker 2: Competitive dynamics, given that they're getting such a warm reaction today,
Speaker 2: do you think that this is excitement around the new
Speaker 2: kid on the block, or is this an idea that
Speaker 2: we'll keep sending the other shares higher as well.
Speaker 12: I mean, it's a yes and no to that. They're
Speaker 12: really not the new kid on the block. Everybody knows
Speaker 12: about They've been around a long time. Their technology is
Speaker 12: pretty much everywhere. It's used by all of the major
Speaker 12: tip makers. At the same time, they are pitching themselves
Speaker 12: a different company that does way more than just sell
Speaker 12: the bare bones of the IP that goes into these chips.
Speaker 12: You know, they're selling themselves as being much more comprehensive
Speaker 12: company and having access to higher profit margins.
Speaker 2: Quickly in here, what about the soft Bank ownership, Given
Speaker 2: they've only floated about ten percent, they will sell more
Speaker 2: eventually over time, But the governance all points to soft Bank.
Speaker 3: Is that a plus or a minus?
Speaker 12: It's a variable. I think that's the way to describe it. Obviously,
Speaker 12: soft Bank will do what Soft Bank does in terms
Speaker 12: of maximizing its profits down the line. It's an investor,
Speaker 12: it's as much as it is a technology company. So
Speaker 12: that's definitely an overhanger or a consideration on armed But
Speaker 12: at the same time it also gives them perhaps some
Speaker 12: latitude that other publicly traded companies might not have.
Speaker 3: Our thanks to Bloomberg's Ian King.
Speaker 2: We want to touch back in one more time here
Speaker 2: on ARMS share before we had to commercial break, because
Speaker 2: we are looking at that i IPO pop. Not only
Speaker 2: is the IPO market back, it is back in time
Speaker 2: for cooler markets. When we're looking at sixty one dollars
Speaker 2: a share here, we are looking at a price here
Speaker 2: that is almost twenty percent now more than what we
Speaker 2: initially had come to price at just last night. Now,
Speaker 2: what does this mean in terms of valuation? You are
Speaker 2: watching a company shoot higher, very quickly, closer to sixty
Speaker 2: five billion dollars in valuation. The current valuation at sixty
Speaker 2: five billion dollars would be a little bit higher than
Speaker 2: what SoftBank had brought back its Arms stake for just.
Speaker 3: A couple of weeks ago. This is Bloomberg.
Speaker 2: Welcome back to Bloomberg Technology. I'm Shinali Bask. We're going
Speaker 2: to look quickly at that arm ipo price once again.
Speaker 2: That first day of trading, you're getting that IPO pop.
Speaker 2: You're getting almost a twenty percent pop in the first
Speaker 2: day of trading so far, that is about sixty dollars
Speaker 2: a share, and it is up immediately from the fifty
Speaker 2: one at priced at at more than sixty billion dollars
Speaker 2: in valuation. You are getting a price very near what
Speaker 2: SoftBank had bought back its stake for in ARM. We're
Speaker 2: going to now bring in Aja Shah for his read
Speaker 2: on this. He's the managing director and co head of
Speaker 2: the Technology, Media and Telecommunications Group for Deutsche Bank, one
Speaker 2: of the underwriters on the ARM IPO. When you look
Speaker 2: at what has happened today, what does it really mean
Speaker 2: in terms.
Speaker 3: Of the companies that can finally make it back to
Speaker 3: market next?
Speaker 13: Sorry, sorry about that, hey.
Speaker 2: Aja, Actually we are gonna get right back to you,
Speaker 2: because we are standing by with a pretty key guest.
Speaker 3: For a day like today.
Speaker 6: That is ARM CEO.
Speaker 2: Rene Has with our own Caroline Hide, Caroline and Ali.
Speaker 4: It is great to be here with Renee, the CEO
Speaker 4: of ARM. It is your day and they talk to
Speaker 4: us about the amount of emails, phone calls, text messages, celebrations,
Speaker 4: the Cambridge part of your company going berserk.
Speaker 7: How does it feel?
Speaker 1: Oh gosh, what an exciting day. You know, I'm hearing
Speaker 1: from high school friends. I have not talked to in
Speaker 1: a long time. Who are saying you never told me?
Speaker 1: I think as we were watching this on TV. But
Speaker 1: most of all, I'm so thrilled for the employees of ARM,
Speaker 1: thirty three year old company, great heritage, but watching all
Speaker 1: the employees in Cambridge celebrate simultaneously that was that was magical.
Speaker 4: And they might continue to celebrate as we see what
Speaker 4: seventeen eighteen percent increase. How has that journey of going
Speaker 4: out to investors the road show, the story that you've
Speaker 4: been able seemingly to successfully sell, the fact that you're
Speaker 4: trading well on this day. What was the vision they
Speaker 4: wanted to hear?
Speaker 3: Revenue growth?
Speaker 4: I hear of eleven percent up to twenty five percent
Speaker 4: in the next couple of years.
Speaker 6: What drives you?
Speaker 1: I think it was a great process. Investors really wanted
Speaker 1: to understand the opportunity we had in front of us,
Speaker 1: and of course AI, which you can't really talk about
Speaker 1: our industry without talking about AI. And I think helping
Speaker 1: them understand that you can't really run AI without ARM,
Speaker 1: without a CPU, and just pointing out to them that
Speaker 1: it's in everywhere, in every device that people touch, was
Speaker 1: a big part of the process for us.
Speaker 4: Because everyone has made the equivalent of your smartphone. It's
Speaker 4: completely absorbed, more than ninety percent of phones is where
Speaker 4: your CPUs are. But the design, the fact that you
Speaker 4: now want to be integral to data centers, and they're like,
Speaker 4: how certain are you on the revenue vision, on the
Speaker 4: profitability vision, even though we see concerns about macro environment
Speaker 4: still and whether or not we're in an AI hype cycle.
Speaker 1: Yeah, so AI is everywhere, and if it's your edge
Speaker 1: device like the Assistant or the Alexa or your autonomous vehicle,
Speaker 1: that's all AI. And now we're seeing it in the cloud,
Speaker 1: in the data center and all the growth with Nvidia
Speaker 1: in VideA announcing one of their newest products, grace Hopper,
Speaker 1: that is based on ARM. So ARM is everywhere relative
Speaker 1: to AI. We also have a very unique business model
Speaker 1: that gives us the ability to have a very very
Speaker 1: good vision in the future in terms of when people
Speaker 1: use our products. So relative to our confidence in the outlook,
Speaker 1: we have a very very high confidence that the growth
Speaker 1: rate that we have talked about will be sustained.
Speaker 4: How Ward, were investeds about China and your exposure.
Speaker 1: I think there were a lot of questions as you
Speaker 1: can imagine about China in general, given all the geopolitics,
Speaker 1: our business there looks a lot like the rest of
Speaker 1: the world. We have great growth in the data center,
Speaker 1: we have great growth in automotive. China's huge on electric vehicles,
Speaker 1: so it's been terrific there for us. I have the
Speaker 1: same kind of headaches that every other tech CEO has
Speaker 1: regarding how to navigate through this, but no different.
Speaker 4: Do you think there will be more pressure now that
Speaker 4: you're public again?
Speaker 7: Ultimately?
Speaker 4: I mean you came to ARM in twenty thirteen, you
Speaker 4: were listed at that point, but it's not Bean Sin's
Speaker 4: twenty sixteen that you have been How does the game
Speaker 4: change as a leader of that business now?
Speaker 1: Yeah, I think there's some things that we were able
Speaker 1: to do as a private company that will just be different. Right,
Speaker 1: quarterly earnings, making sure that we hit all our commitments.
Speaker 1: But ARM is not a business you measure from quarter
Speaker 1: to quarter. Measure us over years and decades, and the
Speaker 1: long term vision is something that I am very, very
Speaker 1: passionate about, and we'll continue to drive the company the
Speaker 1: same way private or public.
Speaker 4: You have a lot of key vested interests, whether they
Speaker 4: be your clients, APPLETSMC and TELL taking big stakes in
Speaker 4: the company today? How important are those voices? Visa the masses,
Speaker 4: the head of soft Bank. I'm sure you're on the
Speaker 4: phone too daily.
Speaker 1: Yeah. So one of the challenges of our industry I'm
Speaker 1: familiar with ARM, is that the fact that we're everywhere.
Speaker 1: None of this works unless we play nice with others.
Speaker 1: So we have to have a lot of engagement with
Speaker 1: strategic partners and making sure that we're managing that balance,
Speaker 1: including Masa, our chief shareholder.
Speaker 4: Do you think he lets more of ARM become public?
Speaker 4: Is that something you'd like.
Speaker 7: To see you now?
Speaker 1: Massa and I talk quite frequently, but it's really not
Speaker 1: about the day to day. It's about the long term vision,
Speaker 1: the passion that he and I have about the future
Speaker 1: and really about what this company can be long term.
Speaker 1: So I don't expect that to change being a public company.
Speaker 4: Do you think you go public in the UK? I'm
Speaker 4: sure it's been a bit of sweet for the London
Speaker 4: Stuff Exchange today.
Speaker 5: Yeah.
Speaker 1: So today obviously we're in New York, but we're incredibly
Speaker 1: proud of our UK heritage and we are opening to
Speaker 1: considering that down the road.
Speaker 4: Okay, any sort of timeframe for that.
Speaker 1: None that we can talk about today. I'm trying to
Speaker 1: get through today.
Speaker 4: A little bit well before you get through today. In
Speaker 4: that respect, investors do love all things regarding artificial intelligence,
Speaker 4: But how have you managed to land that your story
Speaker 4: is different? People have been so exuberant about Nvidia, where
Speaker 4: you used to work, but they're really exuberant about GPUs.
Speaker 4: How have you said that you are able to claim
Speaker 4: a larger royalty share of how AI continues to be said?
Speaker 1: Yeah, So one of the benefits of the road show
Speaker 1: was spending a lot of time with investors talking about
Speaker 1: AI and where we fit. And I think one of
Speaker 1: the misconceptions is that a GPU can run without a CPU,
Speaker 1: which is just not the case. The CPU is central
Speaker 1: to every electronics device and there are devices that ship
Speaker 1: with a CPU and a GPU. So once investors kind
Speaker 1: of got that, then explaining where the puck was going
Speaker 1: relative to gosh, in Vidia's next generation host advanced product,
Speaker 1: grace Hopper, is using ARM CPUs instead of the competition,
Speaker 1: the light bulb went on that, oh my gosh, you
Speaker 1: need the CPU. And at the same time, in Video
Speaker 1: has made a big bet on ARM in their most
Speaker 1: sophisticated product, and once that message kind of sunk through,
Speaker 1: the light bulb went on as oh my gosh, I
Speaker 1: get it.
Speaker 4: There has been this moment though, at which we're trying
Speaker 4: to understand how the landscape works with global demand and
Speaker 4: that translating into revenue. When you think of Oracle's numbers
Speaker 4: that came in and look, they delivered thirty percent increase
Speaker 4: when it comes to their cloud provision and their AI bet,
Speaker 4: but it doesn't always immediately turn into revenue in the
Speaker 4: here and the now. How convinced are you that it
Speaker 4: is going to be in the bottom line evident in
Speaker 4: the next coming quarters.
Speaker 1: As far as AI, oh, I think it's un questionable
Speaker 1: that AI, which has already been here right for a
Speaker 1: number of years, the chat CHEPD moment taught us that,
Speaker 1: oh my gosh, the capability of what this can do
Speaker 1: going forward has gone up a level. And I think
Speaker 1: we've seen that over and over in our industry. There
Speaker 1: tends to be lightning bolt moments that greatly accelerate the
Speaker 1: adoption of technology, and I think with AI, as you
Speaker 1: move towards AGI computers that can think, I think we
Speaker 1: now have seen an accelerant for that ultimately down the
Speaker 1: road how people make money off that. It'll get figured out.
Speaker 1: But AI is here to stay. That's unquestionable.
Speaker 4: And it seems as though you're integral to SoftBank's vision
Speaker 4: of AI and Massa's vision of AI. How can you
Speaker 4: announce it a little bit? You say, talking to him daily,
Speaker 4: what his vision of ARM within the ecosystem going forward
Speaker 4: really is?
Speaker 1: He and I share a very same view that ARM
Speaker 1: is one of the most important technology companies in our industry,
Speaker 1: foundational if you will, and I would like to see
Speaker 1: us over the next five to ten years really be
Speaker 1: recognized that way, and he and I are very aligned
Speaker 1: on that. As you can imagine when you think about
Speaker 1: five to ten years out, there's a lot of things
Speaker 1: to talk about in terms of the art of the possible,
Speaker 1: but that's really where he's focused on when his conversation
Speaker 1: with me.
Speaker 4: Long term thinking but then near term action. We understand
Speaker 4: he was pretty integral to calling the shots on price
Speaker 4: points for today's listing. How was that as just an
Speaker 4: IPO experience? Did he end up being like, no, we
Speaker 4: need to leave a little bit of money on the table.
Speaker 4: This needs to be a successful trade.
Speaker 1: But all I can say is. This is my first
Speaker 1: road show, so everything was altering experience. We wanted to
Speaker 1: be at the high end of the range that we
Speaker 1: set forty seven to fifty one, and that's where it
Speaker 1: ended up. So we're happy.
Speaker 13: We're very thrilled with today.
Speaker 4: You said that school friends are going to in touch
Speaker 4: can why have you been hiding this from them? How
Speaker 4: do you feel differently now as a CEO of a
Speaker 4: publicly traded company? Do you feel differently today?
Speaker 1: I feel a little bit differently, and looking ahead at
Speaker 1: this number than what the share price is, that wasn't
Speaker 1: something we looked at before. But you know again when
Speaker 1: and I told this to employees. While the IPO is
Speaker 1: amazing and I could not be more proud of it,
Speaker 1: I am far more excited about the next five to
Speaker 1: ten years and that's where my head is focused. Obviously
Speaker 1: we needed things as a public company CEO, but I
Speaker 1: don't feel too much different.
Speaker 4: And sometimes these are marketing exercises.
Speaker 7: Armor is B to B.
Speaker 4: But do you think you've become more relevant B to
Speaker 4: see now you're saying how people had no idea all
Speaker 4: this because largely people don't realize that every day they
Speaker 4: are interacting with your designs with your blueprints.
Speaker 1: The people who need to know what we do do
Speaker 1: know obviously, just giving the fact that all the global
Speaker 1: partners that we work with going forward, how to market
Speaker 1: ourselves as the public company. That's one of the things
Speaker 1: as a public company CEO I'll spend some time thinking about.
Speaker 1: But right now we're just kind of focused on today
Speaker 1: and what that means.
Speaker 4: And meanwhile, within this exuberance of today, yesterday we saw
Speaker 4: basically every key chief executive of an AI company, AI
Speaker 4: related company, indoors and a closed hearing with Senate Majority
Speaker 4: Leader Chuck Schumer. Can you tell us about regulation? How
Speaker 4: do you see the landscape evolving to ensure that you
Speaker 4: can harness that AI moment.
Speaker 1: I think it's one of those areas that is an
Speaker 1: unknown moment. And I remember talking to an executive about
Speaker 1: the analogy or metaphor we used was when cars were invented,
Speaker 1: you didn't have driver's licenses, you didn't have lanes, you
Speaker 1: didn't have rules of the road. There was a lot
Speaker 1: of things that people had to figure out in terms
Speaker 1: of taking a device that was going to be very
Speaker 1: very productive but could be very dangerous in terms of
Speaker 1: automobile accidents, AI is a little bit of the same
Speaker 1: in the sense that we're now in a new paradigm
Speaker 1: where some rules and regulations need to be figured out,
Speaker 1: and that's why I think you're seeing all this activity
Speaker 1: around that area.
Speaker 4: Is the US leading the charge and regulation?
Speaker 3: Is Europe?
Speaker 4: Is the UK was getting it right?
Speaker 1: From your perspective, I think all the governments are trying
Speaker 1: to figure it out. I know the EU has spent
Speaker 1: a lot of energy on this, as had the UK.
Speaker 1: So in terms of who's getting it right, I think
Speaker 1: it's still early days and everyone's really just trying to
Speaker 1: learn how technology and this new powerful algorithm will work together.
Speaker 7: Keep teaching us. Great to have some time with you.
Speaker 5: Thank you so much.
Speaker 4: Across the CEO of ARM the day of their listing,
Speaker 4: I'm looking at the price point. I'm seventeen percent headipop
Speaker 4: for the day's trading.
Speaker 2: Sanali absolutely, Caroline and Renee has armed CEO first roadshow.
Speaker 3: Thank you very much for your time.
Speaker 2: Now let's bring in Aja Shah, Deutsche Bank's managing director
Speaker 2: and co head of Technology, Media and Telecommunications for Deutsche Bank,
Speaker 2: one of the end writers.
Speaker 3: As we've been talking about, you know, at first.
Speaker 2: One would to react here to what Renee had to say,
Speaker 2: because he did talk about this idea that people will
Speaker 2: pay for AI related stocks and companies eventually. But we
Speaker 2: are in a different era than that hypergrowth, unprofitable type
Speaker 2: of company. You had a profit at ARM, it was slowing.
Speaker 2: What is investor appetite for anything but upward trajectory?
Speaker 13: Yeah, thanks for having me on the show.
Speaker 14: Look, you know, we have we have definitely seen an
Speaker 14: increase in activity on the on the capital market side,
Speaker 14: certainly post Labor Day. You know, there was a lot
Speaker 14: ofventive demand and expectation that the markets would open and
Speaker 14: armwouldn't need to open the market to the i P
Speaker 14: as you've seen the obviously the i PO has done
Speaker 14: very well so far, and and ARM is really a
Speaker 14: play on interesting demand for advanced processing needed to support AI.
Speaker 14: And you obviously just heart run a you know walk
Speaker 14: through uh some of the some of the key you
Speaker 14: know highlights around ARM and why you know people are
Speaker 14: you know so much interested in investing in ARM. We
Speaker 14: have certainly seen uh, you know, the markets sort of
Speaker 14: change the down't from as you said, you know, growth
Speaker 14: at any cause to growth at you know, with with
Speaker 14: with profitability and so I think investors have been doing work.
Speaker 14: They have done a lot of work around ARM, They've
Speaker 14: done work around some of the other i pos that
Speaker 14: came to market earlier this year. Can view on the
Speaker 14: consumer side obviously ARM and in tech, and we've seen
Speaker 14: investors do work and you know, they are still obviously
Speaker 14: still sensitive on valuation, but but there is clear appetite
Speaker 14: to to pay for growth with with profitability. We have
Speaker 14: a robust pipeline of some of these i pos you
Speaker 14: know that are.
Speaker 2: Yet to come right on that pipeline. The reality is
Speaker 2: there's not that much time left in the year. You
Speaker 2: really have to file pretty soon if you're going to
Speaker 2: go public. So is the pipeline into next year much bigger?
Speaker 2: Is it still quite muted given the dynamics we're seeing
Speaker 2: in the market. There's still a lot of macro uncertainties
Speaker 2: out there.
Speaker 14: Sure, the pipeline is is big, and it is getting
Speaker 14: bigger by the day. Obviously, with ARMS successful IPO, I
Speaker 14: think you'll see a lot more companies come to market,
Speaker 14: certainly between now and the end of the year and getting.
Speaker 13: Up for next year.
Speaker 14: We're seeing you know, all across the tech ecosystem. You know,
Speaker 14: on the on the internet side, there are companies like
Speaker 14: Reddit or two ro Go Pop. In fintech, we've seen,
Speaker 14: you know, expectations around Stripe and Plaid. On the software side,
Speaker 14: you know you've Genesis, You've got UKG, Rubric and others.
Speaker 14: And even on the semiconductor space, after you know Armed success,
Speaker 14: there are companies that you know, we're certainly like to
Speaker 14: access the market, companies like an mpror Steri Labs and others.
Speaker 14: So the pipeline is robust and we will see the
Speaker 14: pipeline grow going forward. Obviously it is going to depend
Speaker 14: on how Armed does UH. You know, how investors feel
Speaker 14: about the overall strength of the economy and UH, and
Speaker 14: ultimately what the FED decides to do going forward.
Speaker 3: Is there a playbook here?
Speaker 2: On one hand, you did see them kind of tamper
Speaker 2: down expectations in.
Speaker 3: Order to get this smooth debut.
Speaker 2: On the other hand, there's a cross current that seems
Speaker 2: to be picking its head up in the market, which
Speaker 2: is M and A. Is there a reality that MNA
Speaker 2: can meaningfully compete with the I P O markets?
Speaker 3: And what will give a company about our ex evaluation?
Speaker 14: Yeah, so the M and A market has has slowed
Speaker 14: down this year relative two years past. And you know,
Speaker 14: with with the IPO market you know, showing signs of opening, uh,
Speaker 14: that is a real competition to you know, companies looking
Speaker 14: to acquire. So I do see the opportunity for MNA
Speaker 14: also to increase going forward. Again, not just because the
Speaker 14: IPEO market is strong, but also valuations are you know increasing,
Speaker 14: They're stronger than what they were last year.
Speaker 13: We've seen you know, SMP of seventeen percent, nas.
Speaker 14: Tap up thirty two percent, the Vicks Volatility Index is
Speaker 14: down forty percent, and so I think those are factors
Speaker 14: that certainly corporates look at when they think about MNA.
Speaker 14: And now there is a real option for companies to
Speaker 14: go public, So we do expect companies to start, you know,
Speaker 14: looking at more corporate am and if we've seen some
Speaker 14: financial sponsors and private equity deals happen in the market,
Speaker 14: we haven't seen as many corporate MNA. But again with
Speaker 14: the robustness in the market and the economy is starting
Speaker 14: to starting to grow, we do expect m and.
Speaker 13: A market also to pick up pretty martially in the
Speaker 13: next year.
Speaker 2: Also think about here is that this is not a
Speaker 2: US based company but listed in the United States now
Speaker 2: are you scouring the globe for hopeful.
Speaker 3: Is just given that valuation.
Speaker 2: Might be more reasonable outside of the United States.
Speaker 14: Absolutely, there are you know, several companies obviously in Asia and.
Speaker 13: Europe that have been waiting.
Speaker 14: For ARM and a few other IPOs that will come
Speaker 14: out between now and the end of the year, and
Speaker 14: we will see increase in certainly either cross border listings
Speaker 14: or just listing in Europe and Asia. But we are
Speaker 14: working with a handful of companies that are looking to
Speaker 14: go public, you know, across both sides of the of
Speaker 14: the continent.
Speaker 3: That is Aj Shah.
Speaker 2: He's managing director and co head of TMT for Deutsche
Speaker 2: Bank's investment banks. Thank you very much for your time
Speaker 2: now joining us here in studios. Cameron, I'm sorry he's
Speaker 2: headlined Venture Capital Partner for his read on the IPO
Speaker 2: landscape and other paths to exit. We've been talking here
Speaker 2: about IPOs versus M and A. There's another question I
Speaker 2: wanted to ask you, though there's been a lot of fireworks.
Speaker 3: About this idea of VC's holding on too long.
Speaker 2: When you go into public markets, how do you see
Speaker 2: that playing. Do you think that there will be more
Speaker 2: willingness to start to sell into an IPO rather than
Speaker 2: hold on and clip the games over time.
Speaker 15: Yeah, I mean, I think that you're going to see
Speaker 15: in their arm case, you really only have one seller,
Speaker 15: which is soft Bank, and it's not a traditional venture
Speaker 15: backed IPO though the way they might consider you, SoftBank
Speaker 15: take a private seven years ago and is bringing it
Speaker 15: back out now today.
Speaker 5: We have a couple other companies.
Speaker 15: Coming up this week or the next ten days, Claveyo
Speaker 15: and Instacart, which are both venture backed startups quote unquote
Speaker 15: in the traditional sense, and I think in both those
Speaker 15: cases you'll see the venture investors selling into the IPO
Speaker 15: in a meaningful way. But it's also going to be
Speaker 15: a liquidity event for the company and the employees as
Speaker 15: well as a fundraising event. Right It's an event for
Speaker 15: the company to actually raise funds and capital so they
Speaker 15: can show up the balance sheet as well.
Speaker 2: It's been a bit of a strange year when you
Speaker 2: think about the hopefuls and companies that are going public.
Speaker 3: There is some hope around fintech.
Speaker 2: There's a lot of consumer there's a lot of food
Speaker 2: and delivery, But how much is AI the real silver bullet.
Speaker 2: Do you think that it's a red herring or do
Speaker 2: you think that there's more opportunity else well, arm.
Speaker 15: Is one of the only playees right now for consumers
Speaker 15: and retail investors as well as investors generally to play
Speaker 15: into the AI kind of theme. Other than maybe owning
Speaker 15: Microsoft as that passed through to open ai or Google
Speaker 15: as have passed through to Bard or in vidio. Right
Speaker 15: there really aren't many public opportunities to play the kind
Speaker 15: of boom and AI. But I do think it's a
Speaker 15: little bit of red herring and that there's a lot
Speaker 15: of opportunities elsewhere, and a lot of the companies that
Speaker 15: are going to be listening and coming out, including klavy
Speaker 15: on instacart and you know, we talked about Reddit or
Speaker 15: Intercom or data Bricks or some of these companies that
Speaker 15: are coming out. They're not AI businesses per se, they're
Speaker 15: terrific companies and they're going to do very well. And
Speaker 15: I think the one that in the tech space, in
Speaker 15: the fintech space where I spend a lot of time,
Speaker 15: everyone's waiting for is Stripe.
Speaker 5: Some I think Stripe is going to be the big
Speaker 5: bell weather, but that's not likely.
Speaker 3: To happen when you think it actually goes.
Speaker 15: Who knows, right, they raised the massive fundraising round very
Speaker 15: recently at a steep discount, about a fifty percent discount.
Speaker 15: They were previously priced at ninety five billion. They raised
Speaker 15: it about fifty billion to really shore up the balance
Speaker 15: sheet and also primarily to incentivize employees and keep them
Speaker 15: around because of a stock option plan that was expiring.
Speaker 15: So with that fundraise, I think they have a lot
Speaker 15: more runway now. So I'm guessing that's easily going to
Speaker 15: be well into twenty twenty four before Stripe is going
Speaker 15: to come out.
Speaker 2: Now, you think about Instacart, and it is a big
Speaker 2: win for some of the early investors, including D one
Speaker 2: where D one Dan Sundeim for example, they had a
Speaker 2: roughly sixty percent of their assets invested in venture.
Speaker 3: Capital and private equity. It's been a drag on returns.
Speaker 2: When you look at those crossover funds, those big hedge
Speaker 2: funds that have come into the market, what role do
Speaker 2: you think that they play, not that they're finally starting
Speaker 2: to exit a little.
Speaker 15: More well going forward, and really this year it's been
Speaker 15: very quiet with those guys. You know, we used to
Speaker 15: see Tiger and ko Tu and soft Bank and a
Speaker 15: lot of these funds coming into earlier stage opportunities in
Speaker 15: the venture space, sometimes even like seed deals, which is
Speaker 15: very strange. They've been pretty quiet, and you're also hearing
Speaker 15: about some of those funds trying to sell their positions
Speaker 15: or package up all the positions in a secondary So
Speaker 15: I think going forward, you know, I expect to see
Speaker 15: less of those folks coming into really early stage venture deals.
Speaker 15: But you know, in the case of instacart, you also
Speaker 15: have you know, one of the greatest venture funds, Sequoya
Speaker 15: is one of the major holders.
Speaker 5: You have traditional venture firms in there as.
Speaker 15: Well that'll be looking to hopefully, you know, I think
Speaker 15: get out as part of the IPO.
Speaker 2: Now as they get out, how do you think that
Speaker 2: changes the dynamic around valuations given we've seen so many
Speaker 2: down rounds already this year, Well.
Speaker 15: It's you know, it's been a market reset, right And
Speaker 15: in the case of instat cart, I think the last
Speaker 15: private round was in the thirty nine billion range. I
Speaker 15: think they've priced it very attractively, frankly at nine billion,
Speaker 15: which is actually if you look at the comp which
Speaker 15: is door Dash, which trades it four times revenue.
Speaker 5: Instacart's around a three billion dollar revenue business.
Speaker 15: So the fair price should probably be closer to eleven
Speaker 15: to twelve billion, So I think pricing it at nine
Speaker 15: leads room for upside.
Speaker 5: But it's a.
Speaker 15: Vast reset, right, and we've seen that with Stripe, with
Speaker 15: Klarna on in the private markets as well as in
Speaker 15: the public market scene.
Speaker 5: Of the companies like like PayPal and.
Speaker 15: Square Block, they're all down sixty seventy percent from their
Speaker 15: twenty twenty one highs.
Speaker 5: I think that's consistent across the board.
Speaker 2: You look at what you're seeing in ARM today, you're
Speaker 2: looking at almost a twenty percent pop, more than seventeen
Speaker 2: percent pop.
Speaker 3: At the moment.
Speaker 2: It has been trading in and around more than twenty times.
Speaker 2: It's trailing as sales. Do you look at these companies
Speaker 2: and say that's achievable or is that a one off?
Speaker 15: I think ARM itself is really a one off in
Speaker 15: terms of the type of company. It is that again,
Speaker 15: the play on AI and the current moment, the size
Speaker 15: and scale the business, the partners they have. We have
Speaker 15: these very stable relationships with folks like Samsung and Google
Speaker 15: and Apple, so you know, at the same time it's
Speaker 15: a slow growth business and a high growth sector, right,
Speaker 15: They're not really growing right now. They've had kind of
Speaker 15: a flat last year and they're going to start to
Speaker 15: grow again this year. So the story is not a
Speaker 15: perfect story. And yet you're saying and obviously a fifteen
Speaker 15: twenty percent a pop as already happening, but you know
Speaker 15: there are also non tech names coming out. We started
Speaker 15: this IPO kind of waive these last few months with
Speaker 15: Kava so too, kind of peta and hummus to get
Speaker 15: us here. And now you know, I heard yesterday you
Speaker 15: saw on the news that Birkenstock's coming out, So again
Speaker 15: a non tech name that's going to come out, and
Speaker 15: I think drive interest as well.
Speaker 2: It's no secret Birkenstocks is now my new IPO attire.
Speaker 5: More than to work there, b Birkenstock WI would be
Speaker 5: a public stock.
Speaker 2: Yeah, absolutely, the cameraon I'm sorry headline Benure partner. We
Speaker 2: thank you so very much for your time. Now let's
Speaker 2: take it home with Bloomberg's Caroline Hyde, who's been on
Speaker 2: the ground at NAZAC for us, looking at that fifteen
Speaker 2: percent or so pup at the arm IPO just right out.
Speaker 3: Of the gate just about an hour ago. What's next?
Speaker 4: Yeah, what's next? Trevio Instacart, all of the eyes on
Speaker 4: these companies coming next week, and they're going to be
Speaker 4: from the NASZAC, They're going to be from the New
Speaker 4: York Stock Exchange. There is going to continue to be
Speaker 4: an eye on really how this company continues to perform.
Speaker 4: We know that there's e xuberants around the first day
Speaker 4: of trade. How does ARM manage to continue this narrative
Speaker 4: of growth in the face of China. I thought that
Speaker 4: was notable from Rene has talking about, Look, it's the
Speaker 4: same headache as every other CEO who's exposed to China
Speaker 4: is currently having.
Speaker 7: I think it's.
Speaker 4: Also and the road for ARM and destiny really interesting
Speaker 4: that he told us that they are potentially yeing a
Speaker 4: UK listing, so a secondary listening at some point. That
Speaker 4: was news that they gave to us. So I think
Speaker 4: that's an important step in terms of reminding everyone this
Speaker 4: is a global company with global exposure but also a
Speaker 4: global headquarters. It's UK based. And then what for SoftBank?
Speaker 4: Of course, this is a company now that is trying
Speaker 4: to show that they're back winning when it comes to
Speaker 4: their venture. This hasn't been a seventy percent upside for
Speaker 4: Masayoshi's son, and he's also taken a very hands on
Speaker 4: approach to how he's guided this ipo, how will the
Speaker 4: rest of the IPOs be able to deliver those returns
Speaker 4: for their vcs, and indeed managed to sustain the growth
Speaker 4: story and indeed managed to see a pop on the
Speaker 4: first day of trade. As Karen Snow from Nazlak was
Speaker 4: telling us Shanali, this is largely an art as well
Speaker 4: as a science. They try and make as much of
Speaker 4: a science as they can with their technology, but at
Speaker 4: the end of the day, this does tend to be
Speaker 4: an art to getting the right price point.
Speaker 2: Something I had heard him tell you and a haas
Speaker 2: was that this was his first road show. It's interesting
Speaker 2: because you think about the list of IPOs around the
Speaker 2: corner and the entrepreneurs that are trying to make it
Speaker 2: to market, and the role these underwriters play, some old,
Speaker 2: some new Goldman's big day, the fact that they're playing
Speaker 2: such a big role in the technology market. Mazouho just
Speaker 2: coming up swinging, not only in this IPO, but some
Speaker 2: of the ones.
Speaker 3: Next week as well.
Speaker 2: What did he tell you on the sidelines about what
Speaker 2: it felt like to be listing such a massive company
Speaker 2: in the market right now for the first time.
Speaker 4: I mean, I do think he's trying to keep his
Speaker 4: his emotions contained. And look he was where he was
Speaker 4: telling us that friends that you knew since college were
Speaker 4: getting in touch, saying they had no idea. This is
Speaker 4: a B to B play less than an Instacart B
Speaker 4: two C. And I'm sore sure Fiji over at Instacart
Speaker 4: is getting a lot more friends who recognize she's about
Speaker 4: to have the slog to get this company to go
Speaker 4: public as well. But notably, this has been very idiosyncratic
Speaker 4: in the way that they've democratized their banks, the way
Speaker 4: in which they've had so many underwriters. Really taking a
Speaker 4: leaf out of Ali Barbar's book here, how can that
Speaker 4: be replicated? How can they ensure so interestingly, with Instacart,
Speaker 4: they're going to be depending not on so much the
Speaker 4: institutional players and the integral players like an Apple, TSMC
Speaker 4: and customers.
Speaker 6: Instead, they're going.
Speaker 4: To be basing their focus on retail investor. And of
Speaker 4: course that's why so interestingly Sofi is coming to play
Speaker 4: an underwriting role there. So I'm going to be interested
Speaker 4: as to how they sell that narrative, not just to
Speaker 4: the business population, but to the public.
Speaker 2: Tootionally, right, Instacart would be Sofia's first underwritten IPO. Now,
Speaker 2: last question here for you, because down at the NASDAK
Speaker 2: you're also interviewing Nasdaq's executives direct listings. The business that
Speaker 2: includes listenings is about twenty percent of last year's total revenue.
Speaker 2: How do they feel about the market finally coming back?
Speaker 4: Boyant, God, everyone I've spoken to has a smile.
Speaker 6: On their face.
Speaker 4: They look relatively exhausting to have not sleep slept for
Speaker 4: a few days, but they cannot wait for this really
Speaker 4: pendulum to swing back open. They've totally said Karen snow
Speaker 4: As you were referencing head of Global Listings saying that
Speaker 4: there is so many companies waiting to come out. One
Speaker 4: hundred and fifty seven of course have filed looking to
Speaker 4: really access this window. She feels it could shut by
Speaker 4: well the twenty twenty four elections. Many want to get
Speaker 4: ahead of that sort of political environment. So if we
Speaker 4: can sustain some sort of lack of volatility in the
Speaker 4: markets and some appetite for these companies coming forward, there
Speaker 4: is a whole host of companies that want to start
Speaker 4: listening and want to start listening soon.
Speaker 2: Yeah, that timeline certainly makes sense let alone, the October
Speaker 2: government shutdown, and a whole host of other potential things
Speaker 2: that could get in the way Bloomberg's Caroline had.
Speaker 3: We thank you so very much.
Speaker 2: For your time and your incredible interview is at a
Speaker 2: pretty pivotal moment watching that RM IPO Open Interviews just
Speaker 2: around that. Now, that does it for this edition of
Speaker 2: Bloomberg Technology, the IPO edition coming up next to you.
Speaker 2: Don't forget to check out that podcast. You can find
Speaker 2: it on the terminal. You could find it online as
Speaker 2: well as on Apple, Spotify, and iHeart this is Bloomberg