An Arm and a leg
The business news that matters
Hello and welcome to the latest Off to Lunch…
Yesterday I wrote that it was Arm’s first day of trading in New York. Well, this is how that first day went…
Shares in Arm closed up 25 per cent, valuing the Cambridge-based chip designer at nearly $70 billion (£56.3 billion). Shares in Arm are up another 7 per cent in pre-market trading in New York today.
The photo above shows the management of Arm, including chief executive Rene Haas, ringing the bell to start trading in New York yesterday. They feel even happier now, as you see in the video below…
Unsurprisingly, there is plenty of analysis around today about Arm’s successful debut and what may come next for the company and IPOs in general.
Patrick Hosking notes in The Times that Arm’s float is a reminder of the mistake that UK fund managers made in 2016 by agreeing to sell the company to Softbank for $24.3 billion. Arm is now worth way more than double that price. In contrast, those who put the proceeds of the sale back into the FTSE 100 have seen the blue-chip index rise just 12 per cent over the same period. You can find that column here
The Financial Times reports that investment banks will make $105 million in fees from the IPO and are now well-placed to benefit from a collection of companies floating, with online grocery company Instacart, marketing company Klaviyo and sandal maker Birkenstock all planning IPOs in the US. You can find that piece here
However, the FT and The Economist both note that Arm now needs to deliver on the lofty expectations for the chip designer, which is well-placed to benefit from the growth of data centres and the rise of artificial intelligence. The Economist summarises the challenges facing the company neatly:
Arm’s bosses and bankers have convinced investors that it can juice the royalties its customers pay to use its designs, offsetting the effect of the worldwide slump in smartphone sales currently under way. Arm’s new shareholders appear to have also shrugged off two wider worries confronting markets: the risk of doing business in China, and the excesses of investor enthusiasm for all things artificial intelligence
You can find that analysis here and the FT’s here
For more on Arm and the fascinating history of the company, which was founded in 1990, a reminder that you can listen to our Business Studies podcast episode about it here
Other stories that matter…
1. The steelworks in Port Talbot, Wales, has secured £500 million of funding from the government and £700 million from its owner Tata Steel. The investment secures the future of the site and will fund the installation of a new electric arc furnace that will help cut emissions from the steelworks. However, up to 3,000 jobs could be cut. BBC story here
2. The gap between how much households in London have to spend compared to the rest of the UK is the biggest since records began in 1997, data from the Office for National Statistics shows. Financial Times piece here
3. I enjoyed Vulture’s interview with Bernie Taupin on the craft of songwriting. Taupin co-wrote most of Elton John’s hit songs as well as many others. “I’ve never felt I was very good about writing anything that dealt with happiness because I don’t think happiness is very interesting,” he says. “It’s wonderful to exist in, and be around, and create on a family or social level, but to write about it? It always reminds me of the beginning of Blue Velvet, when the camera pans across all these idyllic backyards with green grass and sprinklers going off and then it pans beneath the earth where you see the dirt and the worms. That’s what’s interesting to me.” You can find the interview here
4. The investor Howard Marks has written about why tennis offers lessons about the importance of balancing winners and unforced errors to succeed and the need to take risks to win. Unforced errors occur naturally when you are trying to hit winners, he writes. The key is deciding whether to focus on hitting more winners or limiting errors. “The proper choice between the two approaches depends on each investor’s skill, return aspiration, and risk tolerance. As with many of the things I discuss, there’s no right answer here. Just a choice,” Marks writes. You can find that piece here
5. Sticking with the topic of mistakes, Tim Harford writes in the Financial Times that learning from mistakes is now widely recognised as healthy in the business world, but few businesses actually encourage staff to flag concerns or use data to find errors. Column here
And finally…
The Rugby World Cup continues this weekend with matches including Wales v Portugal, Ireland v Tonga, and England v Japan.
England started their tournament with a 27-10 win over Argentina last weekend, despite flanker Tom Curry being sent-off after just three minutes. England’s victory confounded the low expectations for the team after their disappointing performances in the warm-up games.
However, an interview with England’s fitness coach Aled Walters puts those warm-up performances in a different light. Walters said this week that the England coaching staff deliberately sent the players into those warm-up games feeling tired to see how they performed when lacking energy and to help them perform better in the actual World Cup matches when they would be energetic and refreshed. This approach, he said, is similar to one adopted by former British swimming coach Bill Sweetenham.
Walters said:
“Sweetenham made sure that the swimmers were tired going into the World Championships, which just preceded the Olympics. They got some medals but he knew if you could compete when you were tired and lacking energy, what were you going to be like when you were free of fatigue and energetic?”
This may prove wishful thinking for England, but you can read more about his comments here
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Best
Graham