Insider Today: IPOs' make-or-break moment

September 6, 2023 • 5 min read

with Dan DeFrancesco

Halfway to the weekend! Here’s a video of Mark Zuckerberg sparring with MMA fighters on a floating barge, proving that reality is always better than fiction. 

Speaking of fighting, the IPO market has been KO’d since 2022. But that could change with one company’s upcoming public debut. More in today’s big story. 

What’s on deck:

But first, an initial important public offering.

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The big story

All eyes on Arm

A company’s upcoming IPO will likely be the biggest US stock debut of the year and a bellwether for the fate of the wider market.

But no pressure, Arm!

The Softbank Group-owned chip designer filed paperwork Tuesday with plans to go public, writes Insider’s Phil Rosen. To put it simply, it’s a big one.

The British company, which designs chips used in most smartphones, is looking to raise up to $4.87 billion with a valuation as high as $52 billion. Even if it slightly misses those numbers, it’ll still be the largest public debut in the US since Rivian’s IPO in late 2021.

But this isn’t your run-of-the-mill large IPO. The market for companies going public has been all but dead since 2022. The deluge of public offerings since March of last year is the worst IPO drought since 2009, according to Bloomberg data.

However, the crux of the issue with IPOs dates back well before 2022. 

SOPA Images/Getty

As is often the case, things took a turn at the onset of the pandemic. 

When the market collapsed in March 2020, plans to go public were put on hold. The stock market recovered in record time, but then something else held up IPOs: VC money. 

Rich with cash, venture investors were happy to keep pouring money into startups. The public markets suddenly didn’t seem appealing when a startup could wait six months for its valuation to double from another round of funding. 

That formula suited startups well until 2022, when cracks started to show in the market. Cash wasn’t cheap anymore — thanks a lot, Fed! — which meant no more eye-popping funding rounds. Meanwhile, IPOs weren’t an option since public investors wouldn’t support the puffed-up valuations startups were clinging to.

Which brings us to Arm’s IPO. A successful public debut, especially such a large one, would open up the floodgates for other companies on the fence about an IPO. Cleaning out the backlog of companies waiting to go public over the past three-plus years would also have some significant knock-on effects. 

More IPOs mean VCs get to cash out those early-stage investments. That means more cash for future investments, something the startup community desperately needs, save for those in AI. 

Of course, there are no guarantees. Should Arm’s IPO fall flat, it could spell disaster. Arm has indicated interest in its IPO from the likes of Google, Apple, and Nvidia.

But if a company in a buzzy sector with big-name backers can’t crack the IPO drought, who can?

3 things in

Markets

🔔 Before the opening bell: US stock futures fall early Wednesday as investors await the release of more economic data 

Andrew Burton/Getty Images

1. Oil prices just surged thanks to Russia and Saudi Arabia extending production cuts. Brent crude surpassed $90 a barrel for the first time since November. The production cut, which will last until December, surprised industry experts.

2. Private equity is finally opening up to the public cloud. From improving dealmaking capabilities to boosting their portfolio companies, here’s how companies like Apollo and EQT are using the public cloud. 

3. China can’t catch a break. More bad news for the country that is struggling to revive its economy and is battling a property crisis. Bloomberg Economics predicts China’s GDP will only briefly surpass the US’s in the mid-2040s before “falling back behind.” The economists had previously believed China could overtake the US in the 2030s.

3 things in

Tech

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1. RIP to Apple’s lightning cable. The iPhone maker is set to change its charging cable for the first time in more than a decade. The iPhone 15 — set to come out this month — will reportedly use the new cord.

2. Why tech is positioned to dominate the stock market. Tech has already led the stock market for about a decade — starting when Apple became the biggest company in the world. But tech like AI is going to solidify the industry’s dominance even more.

3. Cofounder of Google’s AI division says everyone will soon have their own AI-powered “chief of staff.” Mustafa Suleyman predicted that within the next five years, everyone will have access to an AI assistant. It’ll be super smart and even understand your personal history.

3 things in

Business

Arantza Pena Popo/Insider

1. Loneliness is a design flaw. The amount of third places — social spaces we regularly visit that aren’t our home or work — is on the decline. This is a catastrophe for our communities and for us, Insider's Eliza Relman writes. It’s so bad that the US Surgeon General Vivek Murthy calls this an epidemic of loneliness.

2. Inside the secretive world of superyachts. The rich are buying superyachts in record numbers. They’re the ultimate symbol of wealth and allow the rich to relax — and broker deals — without so many prying eyes. Their staff onboard even have to sign comprehensive non-disclosure agreements.

3. NYC is having an Airbnb reckoning. A new short-term rental law is going into effect this week. It impacts around 40,000 listings and includes restrictions like a reservation cap of two people and banning entire-unit rentals.

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What's happening today

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The Insider Today team

Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.

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