Investors often fantasize about getting in on the ground floor of the next big thing. After all, who wouldn’t want to have been one of the early investors in Amazon, Microsoft, or Google?
That’s why a company’s Initial Public Offering (IPO) can tempt many investors into buying in, especially when it’s a tech company that some believe will be a major player in the coming AI boom.
Arm Holdings (NYSE:ARM) is just such a company. The British chip designer recently had a highly publicized IPO and saw its shares that were initially priced at $51 jump above $63. But like so many other companies, it was all downhill from there.
So how do you buy ARM stock, and should you buy it at all?
Is ARM Stock Publicly Traded?
As of September 14, 2023, Arm Holdings is a publicly traded company. But it’s not the first time the company has gone public. The chip designer has been around since 1990 when it was founded in a joint venture that included an investment by Apple.
The company officially became ARM Ltd in 1998, just ahead of the company’s first IPO that same year. But over the following years, Apple’s stake in the company dwindled, and in 2016 Softbank Group purchased ARM in a $32 billion deal.
In 2020, Nvidia made a play to buy ARM from Softbank in a deal that was reported at $40 billion. However, concerns by the major worldwide trade commissions led to the deal being called off.
What Is The Ticker For ARM?
The ticker for Arm Holdings is ARM. The company was formed out of Acorn Computers, which made RISC processors in the 1980s. They called their products Acorn RISC Machines, or ARM.
Though the company has been a major player in the chip industry for decades, ARM doesn’t actually manufacture any chips of its own. The company’s designs and its architecture have been sold to such tech notables as Apple, Nvidia, and Qualcomm.
The main benefit to ARM’s signature chips is that they’re more efficient than offerings from competitors Intel and AMD. Those companies can deliver a more powerful chip, but ARM’s more efficient design is ideal for smaller devices like smartphones.
How to Buy ARM Stock?
Now that the IPO is complete, buying ARM stock is as simple as buying any other stock or ETF.
Just head to your preferred brokerage and purchase shares of ticker symbol: ARM.
Generally, it’s best to buy shares via a Limit Order, which is the highest amount your willing to spend buying shares.
Should I Buy ARM?
The company has a storied history and a definite lock on the market, but it still may not be the best time to buy. That’s because many stocks struggle after their IPOs.
Consider Sportradar (NYSE: SRAD) which went public in the fall of 2021. After a touted IPO, the stock plummeted 60% thereafter. While that may be steep, volatility after an IPO is more the rule than the exception.
That’s because many early investors have been holding for a long time, and take the IPO as an opportunity to finally reap their profits. Even though companies put a great deal of time into determining their initial stock price, it’s the market that will ultimately decide what the stock is worth.
That’s why many investors stay far away from post-IPO stocks, and wait to see how things will shake out in the weeks and months afterward.
Is ARM Holdings a Good Investment?
Aside from the IPO hangover, there are concerns about the company’s ability to deliver gains for its investors. The chief concern is that revenue fell 1% for the fiscal year that ended March 2023. That revenue decline has been attributed to softer smartphone shipments.
Those concerns are exacerbated by the fact that ARM doesn’t produce chips itself. Most of its money comes from royalties paid from its designs, and many analysts argue that the company doesn’t have any room to grow in a highly competitive marketplace.
ARM and its defenders have countered that the company is poised to take advantage of another market: AI. While some have wildly speculated that the company could be as big as Nvidia, there’s no evidence to suggest ARM is even close yet.
Is ARM Holdings Owned by China?
ARM is based in Cambridge, UK. Softbank is the majority shareholder of ARM, owning over 90% of the company’s shares, but Softbank is based in Japan. However, there’s confusion around the company’s origins because of an independent entity called ARM China.
ARM China is licensed to sell ARM technologies in that country, and because 25% of ARM’s business comes from China, ARM China is actually ARM’s biggest customer. While ARM is not owned by China, it’s significant stake in the country has opened the company up to potential risks.
ARM doesn’t fully own ARM China and it’s only a stakeholder in that company, so there have been divisions between the two entities. There are also real fears that increasing government regulations and restrictions on Chinese technology could severely affect ARM’s bottom line.
Does ARM Stock Pay a Dividend?
ARM stock doesn’t currently pay a dividend, and it’s not likely to pay one in the near future. Investors have to judge the stock’s worth on its valuation and ability to deliver long-term gains.
While it’s generally prudent to wait until after a company’s IPO to take a position, there are still concerns about stagnant revenue and ARM’s ties to China. Bulls will say that the company has unlimited potential due to its AI future.
Analysts, on the other hand, are hesitant to endorse the stock, with the general consensus that ARM shares will likely stick around $50 over the next 52 weeks. That’s why it’s probably best to avoid ARM for now. But because of the high breakout potential, it’s still a stock to keep on your watchlist.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.