Arm's shares rise as Wall Street eyes IPO lock-up expiration

FILE PHOTO: Illustration shows Arm logo

By Chibuike Oguh

NEW YORK (Reuters) -Shares of Arm Holdings, the British chip designer backed by Softbank Group, gained 2.1% to $129.50 on Tuesday as markets braced for increased trading activity following the expiration of the lockup period tied to its blockbuster initial public offering (IPO).

Most market debuts include a lockup period of up to six months in which company insiders and pre-IPO investors are prohibited from selling their shares. This typically limits the amount of shares available for public trading.

With only 9.5% of Arm's outstanding shares available for trading since its September IPO, the expiration on Tuesday of its lockup period is expected to allow more investors to offload a portion of their holdings. Softbank owns a 90% stake or about 930 million shares in Arm, according to LSEG data.

The volume of Arm's shares traded on Tuesday was about 18.1 million shares, compared with the stock's 25-day moving average volume of about 28.5 million shares, according to LSEG data. Such a thin float of shares available for trading can subject them to big swings.

Arm's shares have surged by 68% since it reported quarterly results in February that beat analyst expectations, driven by increased demand for chip designs tailored for artificial intelligence computing.

"The lockup seems to have weighed on shares in the run-up to its expiration, but not enough to take shares below their February run-up," said Michael Ashley Schulman, chief investment officer at Running Point Capital in an emailed statement to Reuters.

"The big unknown factor pertains to Softbank's intentions regarding the 90% of the chip company that it still owns," he added.

Several Arm major customers, including Nvidia, Alphabet's Google and Intel, also hold small stakes in the chip designer. Taiwan Semiconductor Manufacturing Co (TSMC) disclosed a sale of 850,000 shares in Arm in February.

(Reporting by Chibuike Oguh in New York; Editing by Alden Bentley, Lance Tupper, Will Dunham and Jonathan Oatis)