Greetings, Term Sheeters. Finance reporter Luisa Beltran here.
The IPO market passed a big test Thursday when Arm Holdings, the semiconductor designer owned by SoftBank Group, rose nearly 25%.
The deal is considered a bellwether for the health of the IPO market. Arm delivered the year’s biggest IPO when it raised about $4.9 billion. Its strong performance bodes well for the rest of the IPO market, which has been nearly dormant since 2021. There are also two big deals scheduled for next week: grocery technology business Instacart and Klaviyo, a data and marketing automation firm. Birkenstock, the sandal maker, also made public the registration statement for its IPO on Sept. 12.
“It is a very positive signal for the fall IPO market that [Arm] traded up,” said Matt Kennedy, senior IPO strategist at Renaissance Capital, a provider of pre-IPO research that manages two IPO-focused ETFs (NYSE: IPO, IPOS).
Arm is the first major tech IPO this year, Kennedy said. “There was a lot of pent-up demand for new tech issuers. The underwriters appear to have structured the deal to work,” he said.
This year, the IPO market has outpaced 2022’s new issues. So far, 73 IPOs have raised $14.8 billion, according to Renaissance data. This compares to 72 offerings for all of 2022 that collected $7.7 billion.
The Arm IPO was also a big test for Goldman Sachs, which was one of four banks leading the Arm offering. Goldman is also lead underwriter on Instacart, Klaviyo and Birkenstock.
Instacart and Klaviyo both unveiled IPO valuations that were below their last rounds. Instacart is seeking a $9.3 billion valuation, which is far below the $39 billion valuation the company snagged when it raised $265 million in a 2021 funding round. Klaviyo, meanwhile, is targeting an $8.3 billion valuation, down from the $9.5 billion valuation it received in May 2021.
Arm was also cautious. The company had targeted a $60 billion to $70 billion valuation, but when its IPO priced late Wednesday Arm was valued at $52.3 billion. That soared to nearly $65 billion by the market close on Thursday.
Other companies coming to market should follow a similar playbook, Kennedy advised. “Be conservative or else,” he said.
See you Monday,
Luisa Beltran
Twitter: @LuisaRBeltran
Email: luisa.beltran@fortune.com
Submit a deal for the Term Sheet newsletter here.
Joe Abrams curated the deals section of today’s newsletter.
