What Arm and Instacart say about the coming IPO wave
investment bankers for flogging their vision, at the alchemical process of divvying up shares to new investors and at the money left on the table when the price of a company’s shares soars as soon as they begin trading on an exchange. Many plans have been hatched to improve the process, with varying degrees of success. When going public in 2004 Google botched a “Dutch" auction for its shares, which started with the highest bid and worked downwards, rather than upwards, to a price that matches the supply of shares to investors’ demand.
As a final insult to the formalities of the normal IPO process, an interview with the search giant’s founders was published, of all places, in Playboy magazine, and of all times, during the supposedly “quiet period" in the run-up to their company’s stockmarket debut. Little of this bravado was on display on September 19th, when Instacart was welcomed on New York’s Nasdaq exchange. The grocery-delivery firm is one of the latest to ring the bell after an almost two-year drought in IPO activity.
Instacart sold its shares for $30 a pop, the top of a price range that had been revised higher in the days before its listing. Their price closed a further 12% above that after the first day of trading, giving the firm a market value of $11bn. That was the second strong debut in as many weeks.
On September 14th Arm’s share price climbed by 25% after its Japanese owner, SoftBank, floated around 10% of the chip designer’s stock on the Nasdaq. On the surface, Arm and Instacart look rather different. Instacart’s market capitalisation is less than a quarter that of Arm.
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