Arm Holdings will help boost the IPO market, according to the venture capitalist behind Airbnb and Pinterest.
FirstMark Capital’s Rick Heitzmann believes real fundamental demand for IPOs is returning.
“People are looking for the new toy,” the company’s founder and partner told CNBC’s “Fast Money” on Thursday.
SoftBank-affiliated chip design company Arm rose nearly 25% in its Nasdaq debut on Thursday. The market capitalization at the end of the day was $65.2 billion.
“This isn’t even a real IPO. This is a re-listing of a company by Softbank to the public, similar to Kenvue, namely J&J.” [Johnson & Johnson] Spin-off,” Heitzmann added. “There are people who want to buy IPOs.”
According to Heitzmann, there is now a more rational background for IPOs compared to the zero interest rate environment. He believes Arm executives will make the IPO a success.
“They had to factor in the price. If Arm had traded down today, the market would have felt very different,” Heitzmann said. “They also have a very small and limited float. So they limit demand and set prices right.”
And Heitzmann expects Instacart’s IPO next week to follow in Arm’s footsteps.
“That’s why they’re going to lower the price of Instacart by 70% compared to the last private round,” said Heitzmann, who has no stake in Arm or Instacart. “They’re pricing it in as a good new normal for a recovery.”
Instacart will be priced after the market closes on Monday and will begin trading on Nasdaq on Tuesday under the ticker symbol CART.
Heitzmann assumes that the shares of the food pickup and delivery service will develop well from the start. He points out that Instacart’s advertising business should also boost its bottom line.
“They sell products with very low profit margins to advertise against them,” he said. “It was a good model for supermarkets. It was a good model for Amazon.”
But Heitzmann wonders which investors will actually enjoy Instacart and marketing automation company Klaviyo, which is set to go public next Wednesday.
“People have been wondering what the appetite of the big traditional IPO buyers is,” Heitzmann said. “We’ll find out next week.”
Source : www.cnbc.com