Traders on Wall Street are bracing for a potential selloff in the stock of Arm Holdings (ARM) as the lock-up period following the British chipmaker’s initial public offering (IPO) expires.
Arm Holdings went public in September 2023, and since then its share price has risen 109% to $126.74 U.S. per share.
However, the six-month lock-up period that prevents company insiders and owners from selling their stock expires today (March 12), paving the way for a big selloff, say analysts.
Complicating matters with Arm’s stock is the fact that the company’s largest shareholder is Japan’s SoftBank Group, which owns 90% of the microchip and semiconductor designer.
It is unclear what SoftBank plans to do with the 900 million Arm shares that it owns now that the lock-up period has ended.
The Japanese holding company exerts massive influence over Arm’s stock and can easily sway the price.
SoftBank’s last public comment on Arm Holdings came during the company’s earnings call in February of this year, when management said that Arm remains their “most important company.”
Some analysts have estimated that SoftBank currently has $90 billion U.S. of Arm shares available to sell now that the IPO lock-up period has ended.
SoftBank could sell some or all of its Arm stock and use the proceeds to fund other investments or return capital to shareholders in the form of dividend payments, say analysts.
Many top technology companies also have large stakes in Arm stock, including Nvidia (NVDA), Advanced Micro Devices (AMD), Alphabet (GOOGL), and Taiwan Semiconductor Manufacturing Co. (TSM).
The uncertainty surrounding the end of the IPO lock-up period has made analysts cautious regarding Arm stock.
Despite the big run-up in the share price since the IPO six months ago, only half of the analysts who cover Arm currently have a “buy” rating on the stock.
