Can Arm’s listing reignite the IPO market?

This is an audio transcript of the FT News Briefing podcast episode: ‘Can Arm’s listing reignite the IPO market?’

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, August 22nd. This is your FT News Briefing.

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The sell-off in long-term US government bonds continued yesterday. And tech start-ups are wondering whether Arm’s listing will reignite the IPO market. Plus, countries are trying to find middle ground between the US and China. That means a whole new set of alliances.

Alec Russell
If you’re a clever middle power, you can sometimes be close to the west. You can sometimes be close to China. And sometimes be close to Russia.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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The yield on the 10-year US Treasury hit 4.35 per cent on Monday. The last time that happened, if you go back to 2007. Here to talk about the bond sell-off is the FT’s US markets editor, Jennifer Hughes. Hi Jen.

Jennifer Hughes
Hi there.

Marc Filippino
So, Jen, it’s been 16 years since the yield on the 10-year Treasury was this high. That is wild.

Jennifer Hughes
Yeah, November 2007 and the 30-year yield also hit a high not seen since 2011. So we’ve got the same thing really going on in both. And it wasn’t so much fundamentals as really just the market was eyeing this high. On Friday, we’d almost reached this level and traders were sort of itching to take out this level. And then we can see what happens next. I know that sounds more technical than we’d like to see in a front page FT story, but I think that’s really the reality of what happened.

Marc Filippino
Now, how come we didn’t see the same sort of movement from equities, Jen? I mean, the S&P was up a little bit yesterday.

Jennifer Hughes
I think we’re seeing a bit of a divergence this week and what the stock market, the Treasury market, are focusing on. First up, with the stock market, we got Nvidia earnings on Wednesday and that’s so important. Nvidia stock was up on Monday. Now what that is is expectations that it will do a repeat of what it did three months ago and knock it out of the park in terms of higher revenues, higher profits and a really strong growth forecast that will give everyone a lot more faith in this whole AI thing that we’ve been talking about. For the Treasury markets, the focus is really on the Jackson Hole symposium. This is the annual gathering held by the Kansas Fed later this week. And Jerome Powell is speaking on Friday. We’ve got people like Christine Lagarde speaking as well. And that will be the key for interest rates and for yields, really, is that what they say there. The chances are they’re going to stay quite hawkish. And that’s what was, you could say was reflected in yields on Monday.

Marc Filippino
Jen Hughes, the FT’s US markets editor. Thanks, Jen.

Jennifer Hughes
You’re welcome.

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Marc Filippino
Chip designer Arm filed a blockbuster IPO on Monday afternoon in New York. And that has everyone wondering whether other private Silicon Valley tech companies will follow suit. I’m joined now by the FT’s west coast financial editor, Tabby Kinder. Hi, Tabby.

Tabby Kinder
Hi, Marc.

Marc Filippino
So Monday’s filing Tabby has a lot of people wondering whether Arm will kind of set the tone for a new season of public offerings. Why is that?

Tabby Kinder
Yeah. So the Arm IPO is in many ways going to be watched as a signal by the tech start-up community as just a test of investor appetites because it’s been a hard 18 months with almost no tech IPOs. And the Arm listing is due to be so big at the moment it could be anywhere from 50 to 70bn plus. That’s . . . it will be a signal to the tech market that 18 months of closed IPO markets could be coming to an end. But at the same time, I mean, Arm is an anomaly. It’s a really large company. It deals in mostly in hardware. So for the companies in the pipeline that are really desperate to IPO at some point soon, like Reddit, Discord, software group Databricks, Instacart. These companies have very different fundamentals but what we’re really looking for is a gauge of investor sentiment that provides a glimmer of hope to the tech start-up world.

Marc Filippino
Yeah. As you mentioned, Arm is kind of in a league of its own. But what would happen if it were to set off a wave of new listings?

Tabby Kinder
What will happen with Arm is that it will likely signal that the IPO market’s window is open and that’s a big difference from signalling that the IPO market is great. Right? So likely the companies that need to IPO, they’ve spent the last year or two years running down on cash and need to raise some capital or have other reasons for needing to raise capital. The really desperate ones will go. The companies that are able to hold out probably will delay until markets are much more stable even if this window is opened by a successful Arm IPO.

Marc Filippino
Tabby Kinder is the FT’s west coast financial editor. Thank you Tabby.

Tabby Kinder
Thanks.

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Marc Filippino
Leaders from across the developing world are gathering in Johannesburg, South Africa this week. They’ll debate whether the Brics group of nations should expand. Brics is an acronym of the current members: Brazil, Russia, India, China and South Africa. And if all countries that want to join do get included, Brics could represent 45 per cent of the global economy. It would mark a huge shift of geopolitical power away from the west. Alec Russell is the FT’s foreign editor and he joins me now to discuss this. Hi, Alec.

Alec Russell
Marc, hello.

Marc Filippino
So first of all, Alec, which countries want to join Brics and why?

Alec Russell
There’s a whole host of countries from around the world that want to come on board. Some of them are natural associates of what used to be known as the global south, which is a term for the kind of big developing countries, but also other suitors that want to join it from the Middle East with big, well-developed economies.

Marc Filippino
Why have we gotten to a point where Brics has gotten so popular that countries are beating down the door to get in?

Alec Russell
Well, it’s a very interesting time in geopolitics right now. I mean, obviously, you have the most important phenomenon, which is America’s rift with China. There’s a whole host of other countries that have sensed an opportunity, and I call this the à la carte world. They sense that after long years when America was the sole superpower and they had to basically either do America’s bidding or be sort of outside the favour, now, actually, if you’re a clever middle power, you can sometimes be close to the west, you can sometimes be close to China, you can sometimes be close to Russia.

Marc Filippino
Yeah, like one country that really comes to mind is Turkey.

Alec Russell
Turkey is a classic example of a middle power. It’s a member of Nato. Turkey’s been pursuing its own path and has been having close contact with Russia, and that’s been deemed by the west to be fine because that’s the price to be paid by the west, as it were, for keeping Turkey sort of onside.

Marc Filippino
So, Alec, you spoke to the person coordinating the Brics summit. Do we have a sense of whether or not the group will expand?

Alec Russell
He said that there are 22 states that have asked to join and that it’s all up for grabs effectively, that there has been no decision taken about who will join and who can join. So I think there’s going to be a huge trade-off going on. Because if you are the Brazilian delegation or the Indian delegation, you’re particularly keen to see that they retain a sort of relative dominance in the group. They don’t want loads of smaller countries to sort of come in and form a part of a China club. So I think there’s going to be an awful lot of arguing behind the scenes.

Marc Filippino
Alec Russell is the FT’s foreign editor. Thanks, Alec.

Alec Russell
Thank you, Marc.

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Marc Filippino
You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.