The Arm IPO 2023 will take place on September 13 with the Arm stock starting trading on September 14 under the stock ticker ARM. The Arm stock IPO is expected to be the largest IPO since the Rivian IPO in 2021. But with the Arm IPO oversubscribed by 10 times the availability, is the Arm IPO a good investment? The Arm Holdings IPO is expected to launch at a very lofty valuation. That means that on the Arm IPO date, the Arm stock price will already be extremely overvalued. And the latest Arm IPO news shows that Arm Ltd. might raise the Arm stock price even higher than the current IPO price range, making the stock even more over valued. Luckily there are ways to trade the Arm IPO and make money with both day trading and swing trading the Arm IPO.
The Arm IPO is expected to take place on Thursday September 14th. No not that kind of Arm we’re talking about Arm the company – the chip maker that supplies the processors for 99% of the smartphones in the world.
So should you buy the IPO? Is the Arm IPO a good investment? Well we’re going to explain in this video the valuation of the IPO, what the valuation is going to be. Is it going to come in high, low, in the middle? And we’re going to talk about some different ways that you can profit from this IPO.
There are actually three different ways that you can make money from this IPO. First of all, let’s talk about what the IPO is and why everybody is so excited about it. Last week, Arm Holdings announced that it had launched a roadshow for the initial public offering of the American Depositary shares representing its ordinary shares. Now, American Depositary shares, or ADRs, are known as an American Depositary Receipt. And essentially what this is, is when somebody owns shares of a company in another country, in this case the UK, what they can do is they can deposit those shares with a bank here in the United States and then US investors can buy those shares on a US stock market exchange, in this case the Nasdaq. So what’s happening in this particular case is SoftBank, who owns 90% of Arm Holdings, is going to be depositing some of their shares into some US banks. And then those shares are going to be sold to US investors.
A total of 95.5 million shares are being offered by the selling shareholder, a wholly owned subsidiary of SoftBank Group Corp in the IPO. Arm expects the selling shareholder, that is SoftBank, to grant the underwriters an option to purchase up to an additional 7 million to cover overallotments. And yes, we already have an overallotment, so the total number of shares that will be given out during the IPO is going to be 102.5 million. The IPO price per ADS is expected to be between $47 and $51. Well, that was as of September 5th. I’m going to give you an update here in a second. Arm has applied to list the ADR on the Nasdaq Global Select Market under the symbol ARM. So basically, the Arm stock symbol is going to be ARM. It’s going to start trading on Thursday, September 14th. Now, it’s not going to be trading right as the market opens. The trading will generally start sometime midday, sometimes around 10 a.m., sometimes noon Eastern Time. It all depends. There’s just a lot of paperwork and things that have to get put into place before the shares can start trading. But sometime during the day on Thursday, the Arm shares are going to start trading.
Now, we do have the ability to buy Arm shares before it actually starts trading on the open market. And what you can do is you can contact your broker. Not all brokers, but many brokers will allow you to do this. I think Webull, Moomoo, and Sofi all allow you to buy the IPO before it actually hits the open market. Now, if you buy it before it hits the open market, you should end up buying it at the IPO offer price, which as of September 5th was around $51. In a minute, I’m going to explain why it might be a little bit higher than that. But the thing to keep in mind is that if you do buy the IPO now, rather than waiting for it to start trading on the 14th, you are going to be restricted to holding those shares for 30 days. Now, there’s nothing physically stopping you from selling the shares before the 30 days are up. You could sell the shares when it IPOs. However, if you sell prior to 30 days, and you don’t hold the shares for a minimum of 30 days after it starts trading, then your broker could ban you from ever buying another IPO again.
So this is what we have to talk about. Because when a stock does an IPO, especially one that’s very, very, very popular among retail investors like Arm is, what we generally see is that the actual price that SoftBank is going to end up selling their shares at could be $51 or more. But when they actually start trading on Thursday, you’re going to see the actual price of those shares rise. And because of the demand for these shares, there’s a very good chance that the share price could be well over $100 before it actually opens to the general market. So one possible way to trade this, which I don’t recommend, but it’s an option, is to buy the shares during the actual IPO, which would take place before September 14th. So you would contact your broker, you would go in there, you would request the IPO price and assuming you get selected, actually buy the shares, then you could sell them the day that it IPOs for a huge profit, possibly a 40% – 50% profit. Now, you have to understand that if you choose to do that, you will be banned from buying an IPO ever again. So it’s up to you if you want to do that, if you want to kill your account or not. But it is one option.
Now, let’s get into some more detail for those that don’t want to go that route and talk about is it a good idea to buy the shares during the IPO price at around $51 and then hold them for 30 days or longer? And is it a good idea to buy the shares when they actually start trading to the open public? And the other question we have to answer is, can you even buy the shares before they start trading on the open market? And you’re going to find out the answer might actually be no. It might already be too late.
Now, one thing is for sure, if you do decide to buy the IPO, buying in is risky. Arm’s goal of raising around $5 billion in what might be the biggest IPO of 2023 follows other major listings in recent years whose returns have been mostly disappointing. Arm is focusing its IPO marketing efforts on institutional investors. That leaves most retail investors to buy Arm shares at potentially higher prices once they begin trading on Thursday, with retail investors holding individual stocks for less than a year on average. Recent history suggests they could lose money.
Taking a look at the most recent IPOs that were popular among retail investors, as you can see, the return based upon the IPO price was 111% on Airbnb, 33% on Snowflake, and a loss on every single other IPO. Furthermore, buying at the high of the actual day that shares started trading resulted in a loss in every single situation. Now, there’s two things that we have to understand here. One is what is the actual IPO price versus what the price is when the shares start trading? And the other thing that we have to understand is how quickly do those shares actually reach a high of the day on the day that it starts trading? Well, let’s use Airbnb as the example because of all of the IPOs that have come out in the last two years, almost all of them have lost money. But Airbnb made money. And I do believe that this IPO will make money as well, just based upon the hype from retail investors and the demand from retail investors, which you’re going to see here in a minute is unbelievable.
So let’s go back to the Airbnb IPO to understand how it traded and to understand how the Arm IPO might trade as well. Well, the first thing you have to understand is that the Airbnb IPO pre trading, the one that investors were able to buy a few days prior to it actually starting to trade, was $68 per share. Now, you also have to understand that that $68 per share was higher than Airbnb had originally expected to price the shares at. So just because Arm expects to price their shares between $47 and $51 does not mean that’s the actual price that they’re actually going to sell at. They could sell for more than $60 a share. And I’m going to explain in a minute why Arm is considering raising the IPO price. But the other thing you have to understand is just because Airbnb priced their IPO at $68 per share, and just because those who bought prior to its starting to trade bought at $68 per share, does not mean that retail investors were able to buy at $68 a share. Because when Airbnb actually started trading, it started trading at a much higher price.
Airbnb opened trading at $146 per share. You heard that right. $146. A 215% premium to the $68 IPO price. Unreal. So in the case of Airbnb, if you had bought during the pre IPO, that is before the shares actually started trading at $68, you would have made out beautifully. You would have made so much money. And if Arm performs in the exact same way, which it very well could, just based upon the demand for the IPO, then if you buy during the pre IPO price at $51 or even $60 or $70, there’s a very good chance that 30 days from now you could sell those shares at a much higher price than you get them for prior to them actually starting to trade. But there is no guarantee you’re actually going to be able to get the shares. And I’m going to explain why here in a minute.
So now let’s talk about whether it would be a good idea to buy on the 14th when the shares actually start trading on Thursday. And to understand that, let’s take a look at the Airbnb charts. On the day that Airbnb first started trading, the shares opened at $146. Within three minutes, the shares were up to almost $170 before they immediately started to sell off. And this is your first way you can trade the IPO and most likely make money during a very, very, very in-demand IPO like this. Very often day traders will be able to buy the second it hits the market and you can sell exactly two minutes later for a huge profit. I did this on the Airbnb IPO and made a lot of money, and there’s a very good chance you could do that as well. What you do is you simply set a market order in the morning before it actually starts trading. The second it starts trading, you wait exactly two minutes and then you place a market sell order. And usually this will provide a really nice profit of between 15% and 20%.
Now, of course, nothing is guaranteed. And I want to be very, very, very clear here that this is not financial advice. Nothing I’m talking about is a recommendation to buy, sell or hold any stock. This is simply explaining how these IPOs normally behave and how you normally would be able to make money if the IPO goes like most of these in-demand IPOs do.
So that’s your second option. The first option is to buy before it actually hits the open market and hold it for 30 days and then sell for a big profit. Your second option is to day trade it, buy it the second it starts trading, and then sell it two minutes later for a 15% to 20% profit. Now there is a third way to make money as well. But before we get there, let’s talk about a warning for those of you who think about holding. Let’s talk about the people who bought Airbnb at $146 when it first started trading. Holding Airbnb for exactly two years, it fell to $81 per share. Two years later, which means it was down about 40%. So if you bought at $146 and held for two years, you would be down 40% on your investment. If you had held through today, you would be flat. You would be up 0%. So that’s the problem with these in-demand IPOs. When the IPO is very high, valuations like Arm is expected to do that. You just can’t make money holding these long term.
But if you look at what happened three months after the Airbnb IPO, and you got to understand this was right before earnings, if you had bought during the IPO, any time during the day of the IPO and you had held for three months and sold right before earnings, right before that very first earnings, hold about two, two and a half months, you would have made a lot of money because it rose to over $200 per share, and you could have made easily a 25% profit just by buying any time during the opening day. So that is the third way to possibly make money with the IPO is to buy on the day of the IPO, hold it for about two, two and a half months and then sell it hopefully for a nice profit. But you have to sell prior to the first earnings. And the reason for that is once those first earnings come out, at that point, it’s all going to be about the valuation of the company. And as you’re going to see, the valuation of Arm is not good.
Now, before we get to the valuation, let’s talk about why it’s very unlikely that you’re going to be able to buy the IPO prior to the day it starts trading. And the reason is, the IPO orders are already oversubscribed by ten times. This is crazy. There are 10 million Arm shares that are being made available and there’s already demand to buy 100 million shares. Now, obviously, you can’t buy 100 million shares. There’s only 10 million available. So what that means is the first 10 million people who are in line to buy the shares are going to get it. There will be a few people that say, “No, I changed my mind, don’t want to buy it”, and then it’ll kind of move on to the next person. But the result is probably only about the first 11 or 12 million shares that are desired to be purchased – those people are going to get those first 10 million shares. Everybody else who wants this is just going to be out of luck.
So if you put your name into the waitlist to get the shares at this point, there’s a very, very, very small chance you’re actually going to be able to buy the shares with a demand for 100 million shares being bought and only 10 million shares being available. So at this point, your probably only option is going to be buying the shares on Thursday when it actually IPOs. Not that you would necessarily want to buy the shares prior to the IPO anyway because the order book is expected to cause Arm to increase the price. Pricing could already land towards the top end of the $47 to $51 per share range, but it could even go much higher. Final pricing for the IPO is expected to take place sometime on Tuesday.
Now let’s talk about the valuation of Arm and talk about whether this is a good deal or if perhaps it’s overvalued or undervalued. Well, when it comes to the Arm IPO here in 2023, Arm is a dominant chip designer, but the stock price is at a very, very lofty price. Arm’s latest public filing points to a target price of between $47 and $51, which would give the company a market value of roughly $50 billion, making it the largest IPO since electric truck maker Rivian debuted in 2021. As a reminder, if you had bought Rivian during the IPO, you’d be down 70%. And if you had bought it on the first day, you’d be down 80%, and ARM could go the exact same way.
Considering that from a valuation point of view, the stock looks very, very expensive, everything would have to go beyond perfect for them to be able to justify that $50 billion valuation. The main reason that Arm’s share price is considered so overvalued is because Arm, unfortunately, is not a growth stock. A lot of retail investors are looking at Arm and they’re thinking a chip maker. They’re comparing it to Nvidia, they’re comparing it to AMD, they’re looking at the stock as possibly going up 200% to 300% over the next few years. Unfortunately, buying Arm at the current price would be like buying Nvidia shares at $2,000 a share. It is so overpriced right now. Now the problem with Arm is that yes, Arm is used in 99% of cell phones, but that also means that if the demand for cell phones goes down, what happens to Arm’s revenue? Well, guess what? It goes down, too.
And unfortunately, the demand for cell phones has been going down for each of the past four years. And that means revenue for Arm is also going down, which means it’s not a growth stock, it’s actually a losing share. So even at $51 Arm would be extremely overvalued. But what’s crazy is that Arm is considering raising its IPO price because so many investors signed up to buy shares. And quite frankly, I can’t blame them. I mean, when you have a ton of demand like this, you might as well raise the IPO price and make more money for the company. That just makes all the sense in the world.
So where do we stand right now? Well, if you buy Arm, you’ve got to understand, you’re not buying an Airbnb. That was a growth company and expected to go up in the future. You’re buying something more along the lines of a Rivian. That’s extremely overhyped, extremely overvalued. And to make matters worse, at least Rivian is a growth stock. Arm isn’t even a growth stock. Arm is much more in the category of Intel. It’s maxed out. It’s matured. There’s no more room for Arm to grow unless smartphone sales start going up and smartphone sales aren’t going up, they’re actually going down, which means Arm’s revenue is going down, which means Arm stock should go down as well, which means Arm is far more likely to perform like Rivian did and far less likely to perform like Airbnb did.
Still, you should be able to make money if you day trade it and hold it for about two minutes the second it IPOs. And there’s also a good chance you’ll make money as long as you sell it before the first earnings come out – just due to the retail hype and the number of people that want to buy these shares. Now, again, nothing is guaranteed in the stock market. There’s always risk in anything that you do. By no means are these returns guaranteed. However, given the amount of hype that is around Arm, this is how Arm is most likely expected to perform. And these are the ways that you can make money from it.
If you’re looking for a place to buy IPOs before they actually hit the open market, check the list of platforms like Sofi, Webull, and Moomoo that all give you access to IPOs prior to them actually opening and trading on the open market. You can get some free shares if you sign up at https://weprofit.io/platforms.