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Todays Open Interest Change
The biggest IPO of 2023 is taking shape. In fact, it'll be the biggest IPO of the last two years. SoftBank-owned chip designer Arm has filed a preliminary prospectus for a Nasdaq listing that'll take place in early September, which could provide a windfall for SoftBank (OTCPK:SFTBY) founder Masayoshi Son, whose Vision Fund lost tens of billions of dollars last year. It'll also mark the second time Arm has gone public, with the company's first listing taking place in 1998, before SoftBank bought the firm for $32B in 2016 (it could now be worth double that amount).
Snapshot: Arm's circuit designs and chip architecture are present in almost every smartphone, as well as many personal computers, cars, servers, and networking equipment. Demand for its products surged during the pandemic, but profits have cooled in recent quarters as demand for electronics and the chip sector as a whole dropped off. However, the long-term picture for the industry forecasts an exponential increase in computer power for things like big data and artificial intelligence. Arm currently "estimates that approximately 70% of the world's population uses Arm-based products" and expects its market to grow by nearly 7% a year to reach around $247B by the end of 2025.
It will still have to navigate some tricky waters to achieve its goals, with risk factors including exposure to China and open-source architecture groups. One of the world's most important semiconductor businesses has also sought to boost its profile by speaking to a number of major tech companies about being anchor investors, including Amazon (AMZN), Apple (AAPL) and Intel (INTC). It has also reached out to Nvidia (NVDA), which has ridden the AI chip frenzy wave, and had previously tried to buy Arm for $66B before getting the thumbs-down from regulators.
Outlook: The success, or failure, of Arm's offering will be closely watched by investors, issuers and bankers as a gauge of whether the recent revival in the IPO market is sustainable. Some optimism has been seen around smaller IPOs, like restaurant chain Cava (CAVA) in June and AI beauty outfit Oddity Tech (ODD) in July, but bigger players may want to see if things are fully defrosted before jumping in. Grocery-delivery company Instacart (ICART) and footwear maker Birkenstock have both shown interest in going public within the next month as detailed in Seeking Alpha's latest IPO Roundup. (32 comments)
BRICS in the wall
Leaders of the BRICS nations, who are looking to transform their group into a geopolitical force that could threaten the West's dominance on the global stage, have converged for a three-day summit in South Africa. While China and Russia are pushing to expand the bloc, other members (Brazil and India) are hesitant. Even so, BRICS is moving ahead with efforts to reduce reliance on the dominant U.S. dollar (DXY). “Any expansion of the BRICS grouping could determine the speed with which the bloc adopts commercial and financial systems outside of the dollar sphere,” noted ING Economic and Financial Analysis.
Following close on the heels of Moody's rating cuts, S&P has downgraded five regional U.S. banks due to tough operating conditions, including Comerica (CMA) and KeyCorp (KEY). The agency echoed concerns over higher for longer interest rates and asset quality risks, especially for lenders with material exposures to office loans. However, their outlooks were revised to stable, reflecting improved stability and relatively good funding metrics. A Fitch analyst recently warned that U.S. banks could see more downgrades if the operating environment weakens further, while SA analyst Macrotips Trading recommends steering clear of U.S. banks for now, given potentially large unrealized losses on assets. (3 comments)
Masks are back
Lions Gate Entertainment (LGF.A, LGF.B) has reinstated mask mandates for roughly half of its staff at its flagship office in Santa Monica, California. The media giant also brought back rules related to self-testing and international travel, as many employees recently tested positive for the virus. The U.S. has been seeing a resurgence in COVID cases, with the new variant EG.5 (or Eris) being the dominant strain, though there is no evidence of it being more severe than prior variants. Shares of COVID vaccine makers, which are gearing up to launch updated shots this fall, lit up on Monday amid an increase in COVID hospitalizations. (10 comments)
In Asia, Japan +0.9%. Hong Kong +0.9%. China +0.9%. India flat.
In Europe, at midday, London +0.7%. Paris +1.2%. Frankfurt +1.1%.
Futures at 7:00, Dow +0.2%. S&P +0.4%. Nasdaq +0.6%. Crude -0.4% to $79.84. Gold +0.4% to $1,931.20. Bitcoin +0.3% to $26,045.
Ten-year Treasury Yield -3 bps to 4.31%.
Today's Economic Calendar
7:30 Fed's Barkin: 2023 Economic Forecast Update
10:00 Existing Home Sales
10:00 Richmond Fed Mfg. Index
1:00 PM Money Supply
2:30 PM Fed's Goolsbee: A Discussion on Youth Employment
Companies reporting earnings today »
What else is happening...
WSB survey results: Stocks and mutual funds best long-term investment.
Treasury yields climb, with 10Y topping 52-week high and 2Y retaking 5%.
Nvidia (NVDA) pops as Wall Street hikes price targets for 'Godfather of AI'.
Permian Resources (PR) to buy Earthstone Energy (ESTE) for $4.5B.
Kenvue (KVUE) to replace Advance Auto Parts (AAP) in S&P 500 index.
Google (GOOG, GOOGL) mulls offloading another campus in California.
Lockheed (LMT), Northrop (NOC) awarded $1.5B for satellite contracts.
Zoom (ZM) raises FY guidance as it expands products, stock rises 5%.
Microsoft (MSFT)-Activision (ATVI): UK regulator opens new probe.
Sandwich chain Subway nears $9.6B sale to PE firm Roark Capital.