Arm shares experienced a remarkable surge of up to 37% on Monday, extending the chip design firm's ongoing rally driven by impressive earnings. While the stock has slightly retraced some of its earlier gains, it remains significantly higher at approximately $146.80, marking an increase of about 27%. Moreover, it has skyrocketed over 80% over the course of the past three trading sessions. At its highest point today, the stock reached $164, trading at more than triple its IPO price from September 2023, which stood at $51.
This extraordinary surge in Arm shares has proven to be a lucrative windfall for SoftBank Group, the Japanese technology holding company that previously owned the entirety of Arm before its stock offering last year. SoftBank acquired Arm for a substantial amount of $32 billion back in 2016. Although SoftBank attempted to sell the company to Nvidia for $40 billion in 2022, regulatory obstacles and widespread opposition from Arm's licensing customers ultimately thwarted the deal. Following the IPO, SoftBank retained a stake of over 90% in Arm with a whopping 929.7 million shares.
The current market capitalization of Arm stands at around $145 billion. Consequently, SoftBank's stake in Arm is valued at more than $129 billion, surpassing SoftBank's own market cap of $84 billion. Demonstrating the impact of this successful venture, SoftBank shares have experienced an 8% rally on Monday alone and have surged more than 28% within the past three days.
In terms of financial performance, Arm reported revenue of $824 million for the December quarter, surpassing the Street's consensus forecast of $762 million as tracked by FactSet. Looking ahead to the March quarter, the company projects revenue between $850 million and $900 million, significantly surpassing the previous Street consensus of $779 million.
Social Media Speculation Impacts Stock Amidst Short Squeeze Talk
There has been significant speculation on the social media platform X that the stock is currently facing a short squeeze. According to Nasdaq, as of December 31, the short position in the stock amounted to approximately 9.3 million shares - nearly equal to the average daily trading volume. However, after the recent earnings report, trading volume skyrocketed to over 106 million shares on Thursday and has already exceeded 74 million shares today.
Despite having over 1 billion shares outstanding, only around 95 million are actively traded on the public market at present. It is important to note that the lockup agreement, which encompasses both SoftBank's shares and those held by insiders, will expire on March 12.
During a recent SoftBank earnings call, CFO Yoshimitsu Goto was asked about the company's plans for its Arm stake. However, his response remained noncommittal, stating, "As I've constantly emphasized, we have immense confidence in Arm's potential for growth. Naturally, we can leverage Arm's assets in various ways, such as utilizing Arm shares for margin loans...From a financing perspective, we have numerous options at our disposal to support investment."
Both Arm and SoftBank have yet to respond to requests for comment.