Arm Shares Skyrocket as Earnings-Driven Rally Continues, SoftBank Poised to Reap Huge Rewards
Arm, the chip design firm, witnessed a remarkable surge in its shares on Monday, with prices skyrocketing by as much as 37% as the earnings-driven rally shows no signs of slowing down. Despite minor pullbacks, the stock remains significantly higher, trading at around $146.80, up by about 27%. This surge comes after the stock soared over 80% in just three days, reaching a peak of $164 earlier today, more than triple its IPO price of $51 in September 2023.
This incredible rally has proved to be tremendously lucrative for SoftBank Group, the Japanese technology holding company that acquired Arm in 2016 for $32 billion. Even after Arm’s IPO, SoftBank maintained a stake of over 90% in the company. As a result, with Arm’s market capitalization now at about $145 billion, SoftBank’s stake is valued at over $129 billion, surpassing its own market cap of $84 billion. This surge in Arm shares has been particularly rewarding for SoftBank, especially considering the failed attempt to sell the company to Nvidia for $40 billion in 2022.
In addition to this remarkable performance, Arm recently reported revenue of $824 million for the December quarter, surpassing the consensus forecast of $762 million. For the March quarter, Arm expects revenue between $850 million and $900 million, outperforming the prior consensus of $779 million. The stock has also caught attention due to rumors of a short squeeze, with the short position in the stock standing at about 9.3 million shares, equivalent to the average daily trading volume. Following the earnings report, trading volume on Thursday skyrocketed to over 106 million shares, and it has already exceeded 74 million shares today.
It is worth noting that Arm has just over 1 billion shares outstanding, with only about 95 million currently being traded in the public market. The lockup agreement covering SoftBank’s shares and those held by insiders is set to expire on March 12. During SoftBank’s recent earnings call, CFO Yoshimitsu Goto was asked about the company’s plans for its Arm stake. While his response was noncommittal, he expressed confidence in Arm’s growth potential and mentioned the possibility of utilizing Arm shares for margin loans.
As Arm shares continue their rapid and substantial growth, investors eagerly await the expiration of the lockup agreement to see if SoftBank will make any moves to capitalize on its massive stake in the company. With the rally showing no signs of slowing down and Arm’s prospects remaining promising, the stage is set for SoftBank to reap significant rewards from its strategic investment.
Analyst comment
Positive news. The market is expected to continue experiencing growth and upward momentum, with Arm’s shares skyrocketing and revenue surpassing expectations. SoftBank stands to benefit hugely from its stake in Arm, which is now valued at over $129 billion. Investors are eagerly awaiting the expiration of the lockup agreement to see if SoftBank will make any moves to capitalize on its massive stake.
