After months of minimal movement, IPO activity came roaring back over the last week with some high-profile, high-valuation Wall Street debuts. Chipmaker Arm, valued at $60B, began trading a week ago. Instacart and Klaviya both saw their shares jump with IPOs this week, and Databricks looks to be testing the waters for its IPO with another $500 million round of funding. It’s too soon to tell how these high-profile deals will affect the markets over the next year, but the spike of activity has been a change of pace.
In other news, Rupert Murdoch announces his retirement; the Rock and Roll Hall of Fame Foundation board dismisses Jann Wenner after controversial remarks; Toshiba goes private; and growth in the number of women on boards is declining.
In the Spotlight
Arm IPO Excites Wall Street, but Challenges Loom
Supplier neutrality is critical in the $574B chip industry
“With its initial public offering, the largest of the year so far, Arm must perform a tricky dance for a company that has long been seen as the chip industry’s Switzerland, a neutral supplier of designs for chips that doesn’t itself make them. Its customers include many companies that compete with each other, such as smartphone makers Apple and Samsung, and chip makers Qualcomm and Advanced Micro Devices…Concerns about Arm’s neutrality as a supplier to the $574 billion chip industry have limited its strategy in the past. Some companies in the sector erupted in outrage three years ago in response to AI-chip giant Nvidia’s deal to buy the company from SoftBank for $40 billion. The objections gained traction, and the U.S. Federal Trade Commission sued to block the deal, claiming that Nvidia could distort Arm’s neutrality and use its control to gain an upper hand on competitors.” WALL STREET JOURNAL
Instacart Shares Jump After IPO
Brisk trading on day one seen as a sign of an awakening IPO market
“Instacart’s initial public offering had been in the works for years, and Chief Executive Fidji Simo said in an interview that the company’s main goal with the offering is to provide liquidity to its employees. Instacart already has been operating like a public company, she said, and following the IPO it will continue to look for acquisition targets and other ways to build its retail support technology…Instacart, formally known as Maplebear, has been one of the buzziest IPOs this year along with British chip designer Arm and marketing-automation company Klaviyo, and will serve as a signal for whether the market has opened for new listings after a lengthy freeze. Arm's stock rose 25% in its stock-market debut, though it has pared those gains in subsequent trading sessions.” WALL STREET JOURNAL
Instacart’s Founder Steps Away from the Company After IPO
Apoorva Mehta relinquishes the board chairmanship to Instacart CEO Fidji Simo
“Instacart co-founder Apoorva Mehta is checking out with a $1.3 billion fortune following the grocery-delivery company’s initial public offering. Mehta, 37, who stepped down as chief executive officer in August 2021, relinquished his board position as executive chairman as part of the IPO proceedings to current CEO Fidji Simo, a former Meta Platforms Inc. executive. The transition marks the end of Mehta’s 11-year tenure with the company he co-founded in 2012…Mehta’s $1.3 billion fortune includes his 10% ownership of Instacart as well as a stake in his new company, Cloud Health Systems, which aims to address chronic illness. The health-tech startup, which Mehta leads as CEO, has raised $42 million from investors including Thrive Capital, Andreessen Horowitz and General Catalyst. It was valued at $200 million in a November 2022 financing round.” FORTUNE
Tech Giant Databricks Possibly Gearing Up for IPO
With a new $500 million funding round and $43B valuation, Databricks is watching the market
“Artificial intelligence and analytics firm Databricks announced Thursday it raised more than $500 million in a Series I funding round including a new strategic investor in AI leader Nvidia, as Databricks gears up for one of the most anticipated initial public offerings in years…Databricks, which uses machine learning to drive its cloud-based data storage and processing software, is “super excited” to expand its partnership with Nvidia and “double down even more on generative AI,” Databricks’ billionaire CEO Ali Ghodsi told Forbes in an interview….Databricks is “looking” at how the market embraces the most notable stretch of IPOs since 2021, but the company won’t be the “first movers,” waiting for the macro environment to get over the trepidation “hump” with elevated inflation and interest rates impacting growth.” FORBES
SEC Fines Lyft $10M Over Board Member’s Pre-IPO Share Sale
The company agreed to the penalty for the share sale, which occurred prior to the 2019 IPO
“The SEC fined Lyft $10 million for failing to disclose the role of one of its board members in the sale of around $424 million worth of private shares, prior to the firm's 2019 IPO…According to the complaint, the director arranged for an investor's sale of shares to a special purpose vehicle (SPV) with which the director was affiliated. The director, who left the board at the time of the transaction, received millions of dollars in compensation for ‘structuring and negotiating the deal,’ according to the SEC's complaint…Lyft had 14 members on its board at the time of its IPO, including eight non-employee directors. The company agreed to the penalty without admitting or denying the SEC's findings.” INVESTOPEDIA
From Boardspan this Week:
How Should Companies Evolve?
“There are a number of reasons (for companies to evolve), some good and some bad. I define growth as increase in the scope of activities and/or renewal of capabilities. One good reason for growth is to become more competitive. Maybe the core business is under threat or the firm has reached the limits of its natural market so it’s time to stretch. Dell, and many other firms in the PC industry, reached a point where they had to figure out what was next. Another good reason to grow would be that the company’s existing resources aren’t being used effectively. Perhaps that leads to developing an internal exploratory environment complemented by alliances-based activity that bring access to new technology and new people. Less rationally, when business leaders feel pressure from their investors to grow for growth’s sake, they may seek results at any cost, which can result in aggressive and often expensive acquisitions. The idea is that acquisition is going to be a convenient shortcut. In fact it’s not. We know that 70% of acquisitions fail. Post-purchase integration is a nightmare. Acquisition is very often the most disruptive, costly, and painful option.” YALE SCHOOL OF MANAGEMENT
NEW WEBINAR: AI and Governance: What Every Board Needs to Know
Wednesday, September 27, 2023
12pm ET
Boardspan is gearing up for our webinar on AI and governance, and it promises to be a great conversation. Join us to hear CEO Abby Adlerman in conversation with AI thought leader and board member Dr. Ayesha Khanna, about whom Focus Magazine says:
“Listen to this woman! The boss of one of the world’s most important artificial intelligence companies wants us to shape our own future.”
With one week to go, the webinar is filling up, but there’s still time to reserve your spot. Looking forward to seeing you there: Bring your questions!
