Get free Arm Ltd updates

Arm’s $5 billion IPO this week was the most expensive in five years and brought an $84 million profit to the professional services firms that advised it, including Deloitte.

The SoftBank-backed chip developer has the most for nothing since the U.S. arm of insurance group Axa went public in 2018, according to a Financial Times analysis of SEC filings for companies that raised more than $1 billion in an IPO underwriting costs incurred in connection with the IPO.

The total amount of $84 million is seven times larger than the average large IPO, making it the third most expensive in the last decade.

The majority of Arm’s total – about $51 million – went to accounting fees, particularly to auditor Deloitte. The company also spent nearly $17 million on legal fees, primarily benefiting its lead counsel, Morrison & Foerster.

While bank fees are usually directly related to the amount of money raised in a deal, spending on other costs, from consultants to event planners, can vary greatly from company to company.

Unlike the growth-oriented startups that have dominated IPO markets for much of the last decade, Arm is over 30 years old, consistently profitable and had already spent nearly two decades as a publicly traded company before SoftBank agreed to buy it in 2016 .

“If you’re a garden-variety biotech startup with low revenue, the review isn’t that complicated,” said Jay Ritter, an IPO expert at the University of Florida. “Arm has a complicated business.”

A person close to Arm said costs had been driven up by the need to convert financial reporting from international to U.S. accounting standards.

Deloitte also noted in the prospectus that the audit required “increased effort” due to the complexity of Arm’s customer contracts. Arm doesn’t build or sell chips directly, but rather earns royalties and royalties by letting other companies use its designs.

Deloitte did not respond to requests for comment. Arm declined to comment.

Companies that raised more than $1 billion in IPOs over the last decade spent around $11.5 million on non-underwriting costs, according to the FT analysis.

Alibaba, which raised $25 billion in 2014 on the largest U.S. exchange ever, spent just over half as much as Arm, with $46 million in non-underwriting fees.

Arm’s IPO has been closely watched as a test of the health of the broader IPO market, and its positive reception – shares rose 25 percent on the first day of trading – has boosted investor hopes for another wave of new listings, particularly in, strengthened the tech sector.

But the unusually high costs are a reminder that the Cambridge-based company is not a suitable comparison for most IPO candidates.

A banker who worked on the listing said it was a good sign, but noted that “it’s important for everyone to curb the exuberance a little bit,” adding that investors are more likely to focus on “large transactions in large companies” rather than on smaller groups.

Source :

Leave a Reply

Your email address will not be published. Required fields are marked *