Three IPOs test the market

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Robert Armstrong (0:36)

Thank Pushkin.

Katie Martin (0:39)

It's alive. We've finally got some companies listing on stock markets, big shiny companies at that. It all suggests that the death of the initial public offering has been greatly exaggerated.

We've got some lovely IPOs coming through. We've got chip designer Arm. We've got a grocery delivery company type thing that I'm not terribly familiar with, Instacart. And we've got fashion resistant sandal maker Birkenstock, all lining up to launch on stock markets now or now-ish. So what does it all mean? We're going to figure it out for you.

This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. From sunny London, I'm markets editor Katie Martin, standing in for Ethan Wu, a poor substitute, but I'm going to do my best. And I'm joined down the line from New York by Robert Armstrong, who writes the Unhedged newsletter and who just cannot wait to buy shares in his very favorite German shoe manufacturer. Isn't that right, Rob?

Robert Armstrong (1:29)

Katie, you're wearing Birkenstocks right now, aren't you?

Katie Martin (1:32)

That's a very personal observation. And no, I'm not, but I do wear them pretty much all summer. I know that our opinions differ greatly on these fantastic sandals and you hate them and you're wrong. But listen, let's crack on with the markets thing.

Robert Armstrong (1:45)

Arm first, let's talk about Arm.

Katie Martin (1:47)

Well, let's talk about Arm.

Why is it such a big deal that this thing is hitting the market? Why is everyone so animated about it?

Robert Armstrong (1:53)

Well, the market has been a bit dead for IPOs. I don't need to tell you, Katie, what a weird couple of years we've had in financial markets. Pretty weird.

And we still, despite high stock prices, people still feel a little trepidation.

There has not been a lot of IPOs recently. And this is a big one. This is a $50 billion company coming to market, $50 plus billion company coming to market. They're selling something like nine billion in shares. Do I have that right, Katie? I think so. And it is also being sold by SoftBank and the notorious Masa Son, CEO of the Japanese conglomerate, who is associated with ups and downs in the world of technology. Arm is a brilliant sort of business. It is a chip designer. And what is brilliant about Arm's particular business is all they do is design these things. So all Arm really is, is a bunch of nerds with degrees in electrical engineering, sitting around in a room, thinking up smart ways to build chips. And the building is done by somebody else. So this is what we finance nerds call an extremely capital light business. It's all basically intellectual property and no stuff.

It is also well placed in the world of electronics in that what they specialize in is low power chips. That is chips that can process a lot of information without using a lot of energy and generating a lot of heat. What this means is that they are very good things to have in smartphones and other mobile devices.

Katie Martin (3:37)

Now this is like a huge British success story. And it got taken private by Softbank and it's founder Masayoshi Soh.

Robert Armstrong (3:45)

I think it is, if I'm not wrong, Katie, it's the only British success story since the Battle of Waterloo. Is that, am I getting that right?

Katie Martin (3:54)

Knock it off. Look, the point is no fewer than three UK prime ministers tried to convince Softbank to list this thing in London and it didn't work. So I guess that kind of all relates back to why this is a big deal, right? It's because it's a massive tech IPO, biggest IPO anywhere for the best part of two years, I think it is. This is gonna be a big test of investor demand and there is no better test of investor demand than in the States where there's a huge ecosystem of tech investors.

And yeah, we're gonna figure out really whether markets have had their fill of tech stocks or whether they've still got the appetite and whether this thing has been priced right.

Robert Armstrong (4:30)