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Arm’s $5 billion initial public offering this week was its most expensive in five years, earning an $84 million windfall for professional services firms including Deloitte that advised it.
The SoftBank-backed chip designer has spent the most on IPO-related non-underwriting costs since 2018, according to a Financial Times analysis of SEC filings by companies with IPOs raising more than $1 billion. The most since its launch.
The total cost of $84 million is seven times the average cost of a large listing, making it the third most expensive listing in the past decade.
The bulk of Arm’s total charges, about $51 million, were spent on accounting fees, specifically those of auditor Deloitte. It also spent nearly $17 million in legal fees, benefiting primarily from its lead legal advisor, Morrison & Foerster.
While bank fees tend to be directly related to the amount of capital raised in a deal, other cost outlays, from consultants to event planners, can vary widely between companies.
Unlike the growth-focused startups that have dominated the IPO market for much of the past decade, Arm has been consistently profitable for more than 30 years, spending that time as a public company before SoftBank agreed to acquire it in 2016 for nearly 20 years.
“If you’re an average biotech startup with very little revenue, auditing isn’t that complicated,” said Jay Ritter, an IPO expert at the University of Florida. “Arm’s business is complex.”
A person close to Arm said the company’s costs were overstated due to the need to convert its financial statements from international to U.S. accounting standards.
Deloitte also pointed out in the prospectus that its audits need to be “increased” due to the complexity of Arm’s customer contracts. Arm does not make and sell chips directly, but earns licensing fees and royalties by letting other companies use its designs.
Deloitte did not respond to a request for comment. Arm declined to comment.
According to an analysis by the Financial Times, companies with IPO financing of more than $1 billion spent an average of about $11.5 million on non-underwriting costs over the past 10 years.
Alibaba went public in the United States in 2014 and raised US$25 billion, the largest ever, with expenditures slightly more than half that of Arm, with non-underwriting expenses of US$46 million.
Arm’s listing has been closely watched as a test of the health of the broader IPO market, and its enthusiastic response – with shares rising 25% on its first day of trading – has boosted investor hopes for a new wave of listings, especially in the technology industry.
However, its unusually high costs are a reminder that the Cambridge-based business is not a close comparison for most IPO candidates.
One banker involved in the listing said that was a good sign, but noted that “it’s important that everyone tempers this exuberance a little bit,” adding that investors have been focusing on “big money from big companies.” deals” rather than smaller groups.
