Arm Holdings will help jump-start the IPO market, according to the venture capitalist behind Airbnb and Pinterest.
FirstMark Capital’s Rick Heitzmann believes real fundamental demand for IPOs is returning.
“People are looking for the new toy,” the firm’s founder and partner told CNBC’s “Fast Money” on Thursday.
Chip design company Arm, which is affiliated with Softbank, jumped almost 25% in its Nasdaq debut on Thursday. Its market cap ended the day at $65.2 billion.
“This isn’t even a real IPO. This is a re-listing of a company by Softbank to the public similar to Kenvue which was the J&J [Johnson & Johnson] spinoff,” added Heitzmann. “There are people who want to buy IPOs.”
According to Heitzmann, there’s a more rational backdrop for IPOs now versus the zero-interest rate environment. He believes Arm executives set the IPO for success.
“They had to price for the pop. If Arm would have traded down today, the market would have felt a lot differently,” said Heitzmann. “They also have a very small and limited float. So, therefore, they’re constricting demand and pricing it the right way.”
And, Heitzmann expects next week’s Instacart IPO to follow in Arm’s footsteps.
“It’s the reason they’re going to price Instacart down 70% from the last private round.” said Heitzmann, who does not have a stake in Arm or Instacart. “They’re pricing it to get into a good new normal for an upswing.”
Instacart is set to price after Monday’s market close and start trading on Tuesday under the ticker CART at the Nasdaq.
Heitzmann sees shares of the grocery pick-up and delivery service performing well out of the gate. He notes Instacart’s advertising business should also be a boost to its bottom line.
“They’re selling very low margin products in order to advertise against them,” he said. “It’s been a good model for supermarkets. It’s been a good model for Amazon.”
Yet, Heitzmann questions which investors will actually feast on the Instacart and marketing automation company Klaviyo, which is scheduled to go public next Wednesday.
“People were wondering how much appetite is there from the big traditional IPO buyers,” Heitzmann said. “We’re going to find out next week.”
