Get free Arm Ltd updates
We will send you one myFT Daily overview email finalizing the latter Arm Ltd news every morning.
Arm’s $5 billion IPO this week was the most expensive in fees in five years, delivering an $84 million windfall for the professional services firms that advised the company, including Deloitte.
The SoftBank-backed chip designer has spent the most on IPO-related non-underwriting fees since the U.S. arm of insurance group Axa went public in 2018, according to a Financial Times analysis of SEC filings for companies raising more than $1 in an IPO billion raised.
The total of $84 million is seven times more than the average major stock market listing, making it the third most expensive in the past decade.
Most of Arm’s total – about $51 million – went to accounting fees, mainly to accountant Deloitte. The company also spent nearly $17 million on legal fees, mostly benefiting its lead legal 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 widely between different companies.
Unlike the growth-oriented startups that have dominated the IPO markets for much of the past decade, Arm is over thirty years old, consistently profitable, and had already spent nearly two decades as a publicly traded company before SoftBank broke it down. agreed to acquire the company in 2016.
“If you’re a horticulture biotech startup with little revenue, the auditing isn’t that complicated,” says Jay Ritter, an IPO expert at the University of Florida. “Arm has a complicated case.”
One person close to Arm said costs have been driven up by the need to convert financial statements from international to U.S. accounting standards.
Deloitte also noted in the prospectus that its audit required “more effort” due to the complexity of Arm’s customer contracts. Arm does not build or sell chips directly, but earns licensing fees and royalties by letting other companies use its designs.
Deloitte did not respond to requests for comment. Arm declined to comment.
According to the FT analysis, companies that raised more than $1 billion in IPOs over the past decade spent an average of $11.5 million on non-underwriting fees.
Alibaba, which raised $25 billion in the largest-ever U.S. stock market listing in 2014, spent just over half that of Arm, with $46 million in non-underwriting fees.
The Arm IPO was closely watched as a test of the health of the broader IPO market, and its warm reception – shares rose 25 percent on its first day of trading – has boosted investor hopes for a new wave of new listings strengthened, especially in the technology sector.
However, the unusually high costs are a reminder that the Cambridge-based company is not a good comparison for most IPO candidates.
One banker who worked on the listing said this was a good sign, but noted that “it’s important for everyone to tone down the exuberance a little bit,” adding that investors had focused on “big deals in big companies” rather than from smaller groups.