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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.”
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JPMorgan Chase is stepping up its appeal to small business customers by planning to offer digital payroll processing.
The bank has picked San Francisco-based fintech player Gusto to provide the underlying technology for the feature.
The product will help JPMorgan compete with fintech players including Square and PayPal, which already have payroll services.

Co-founders Eddie Kim, Josh Reeves, and Tomer London of fintech startup Gusto, which handles payroll services for small businesses.
Courtesy: Kelly Boynton | Gusto

JPMorgan Chase is stepping up its appeal to small business customers by planning to offer digital payroll processing, CNBC has learned.
The bank has picked San Francisco-based fintech player Gusto to provide the underlying technology for the feature, according to Gusto CEO Josh Reeves.

“If you’re a customer of Chase payments solutions, you can go to payroll from the same exact place you do banking,” Reeves said. “It’s the same experience, with the same login and credentialing; all that stuff becomes easier when it’s in a one stop shop-type environment.”
JPMorgan, the biggest U.S. bank by assets, has poured billions of dollars into technology in recent years. It’s part of a larger battle for the loyalty of American retail and business customers as fintech players including PayPal and Square morph into do-everything providers that threaten traditional banks. Both companies have their own payroll services.
JPMorgan has previously rolled out fintech features, including a Square-like credit card reader for small businesses and early direct deposit for consumers.

Everyone needs to get paid

When it came to payroll services — a universal chore for small business owners, some of whom still use paper checks to pay workers — JPMorgan decided to partner with Gusto rather than build its own solution.
A fintech partner like Gusto is better able to manage the complexity of offering payroll services nationally. There are nuances to individual states, cities and counties that make the sector difficult to crack, according to Reeves.

Using Gusto will help JPMorgan to speed its time to market for this service, which will go live by the end of 2024, according to a person with knowledge of the situation. The offering will disburse salaries to employees, generate tax documents and pay stubs, and file to local and national agencies.
JPMorgan has 5 million small business customers and more than 200,000 users of its payments-solutions offering, according to the person.
Gusto was founded in 2011 and serves 300,000 small and medium businesses. It was last valued at $9.6 billion. The startup competes with traditional and newer providers including ADP, Intuit, Paychex and Rippling.

–CNBC’s Jon Fortt contributed to this article. More

Striking Writers Guild of America members walk the picket line in front of Netflix offices in Los Angeles, July 12, 2023.
Mike Blake | Reuters

Check out the companies making headlines in midday trading:
Visa — The credit card behemoth’s stock fell 2.5% after announcing plans to change its share structure. Visa’s Class A shares are held by the public, its B shares are held by U.S. banks, while C shares are owned by foreign banks. The company wants shareholders to approve an exchange offer that would release transfer restrictions on portions of the Class B stock.

Semtech — The semiconductor stock rose 10% after beating earnings expectations for the second quarter. Semtech earned 11 cents per share after adjustments, exceeding the consensus estimate of 2 cents per share from analysts polled by FactSet. However, the company offered weak guidance for the third quarter.
Penn Entertainment — The sports betting company’s shares rallied 8.7% Thursday. Deutsche Bank initiated a short-term catalyst call to buy Penn, citing an inexpensive valuation ahead of the launch of ESPN BET, which debuts in November.
Netflix — The streaming giant’s shares slipped 2.8% in midday trading after Chief Financial Officer Spencer Neumann said the ongoing Hollywood writers’ strike is bad for business. Speaking at a conference Wednesday, Neumann also cautioned that its ad-supported streaming option wouldn’t help move revenue forward in the short term and said operating margins would grow slower moving forward.
Yum China — The restaurant conglomerate’s shares gained 5.4% during midday trading after it announced new financial targets and unveiled plans to expand to 20,000 locations by 2026 during an investor day.
AMC Entertainment — The meme stock darling fell 1.1% after AMC said it had completed the equity offering it announced earlier this month. The movie theater chain said it sold 40 million shares at an average price of $8.14, raising about $325.5 million.

Etsy — The e-commerce retailer’s stock rose 3.2% after Wolfe Research upgraded Etsy to outperform from a peer perform rating, citing improving consumer spending and margins.
HP — The PC and printer stock slipped 1.7% on news that Warren Buffet’s Berkshire Hathaway sold about 5.5 million shares of its stock, amounting to roughly $158 million, a regulatory filing showed.
Exxon Mobil, Chevron — Shares of the oil majors were trading higher Thursday as U.S. oil prices surpassed $90 per barrel for the first time since November 2022. Exxon shares gained 1.7%, while Chevron added nearly 1%.
— CNBC’s Samantha Subin, Pia Singh and Alex Harring contributed reporting. More

An AMC Theatre on March 29, 2023 in New York City. AMC Entertainment shares jumped as much as 13%, following a report that Amazon was looking to buy the theater chain. 
Leonardo Munoz | Corbis News | Getty Images

Check out the companies making headlines before the bell.
Yum China — Shares rose over 3% in premarket hours as the Chinese restaurant conglomerate announced new financial targets and unveiled plans to expand to 20,000 restaurants by 2026 during an investor day.

AMC Entertainment — Shares of the movie theater chain jumped 5% in premarket trading after AMC said it had completed the equity offering it announced earlier this month. The company said it sold 40 million shares at an average price of $8.14, raising about $325.5 million.
Etsy — Shares of the e-commerce retailer added 4% before the bell after Wolfe Research upgraded the stock to an outperform rating from peer perform. Wolfe cited three reasons for the upgrade: a rebound in consumer spending, the potential for margin improvement and an improved emphasis on Etsy’s primary franchise.
Semtech — The semiconductor stock rose 1% in early trading despite offering a fiscal third-quarter forecast late Wednesday that calls for a loss of 9 cents to 22 cents a share on revenue of $190 million to $210 million. Analysts had estimated it would earn 12 cents on revenue of $247.7 million during the period. In the second quarter, the company earned 11 cents a share, after adjustments, exceeding analyst’s expectations of 2 cents per share, according to FactSet.
Penn Entertainment — The sports betting stock climbed 3% in premarket trading following a short-term buy call from Deutsche Bank. The bank said there’s reason to believe the stock should see upside ahead.
First Solar — The stock climbed about 2% higher after BMO Capital Markets upgraded shares to outperform from market perform, citing a recent selloff that has created an attractive entry point for investors.

Exxon Mobil, Chevron — Exxon Mobil and Chevron gained about 1% each before the market opened as oil prices reached their highest levels this year, with Brent crude topping $93 a barrel. Occidental Petroleum and Devon saw early morning gains as well.
HP — Shares of the printer and PC maker fell more than 3% in premarket trading after a regulatory filing showed Warren Buffett’s Berkshire Hathaway sold a portion of its stake. The conglomerate sold about 5.5 million shares of HP, worth around $158 million. The Omaha-based giant first bought the tech hardware stock in April 2022, becoming its largest shareholder. Berkshire still owns over $3 billion in HP shares.
General Motors, Ford — Shares of the automakers were up fractionally in premarket trading after United Auto Workers President Shawn Fain said Wednesday night that a strike was “likely” against the companies if a contract agreement can’t be reached before the 11:59 p.m. ET Thursday deadline. Ford CEO Jim Farley struck back, saying the company has received “no genuine counteroffer” on its proposals.
— CNBC’s Michelle Fox, Alex Harring, Yun Li, Tanaya Macheel, Jesse Pound and Pia Singh contributed reporting More

is a leading semiconductor intellectual-property supplier, designing chip technology that is used in high-tech gadgets, including most of the world’s mobile phones. The company then licenses that tech out to the industry’s major players and collects royalties. Roughly five chips in every smartphone are based on ARM’s design and that number’s increasing as the mobile Internet continues to grow.One of ARM Holdings’ biggest customers is . The Cupertino, Calif.-based company licenses its processor
Photo: Chris Ratcliffe | Bloomberg | Getty Images

IPO and tech enthusiasts are excited about the Arm Holdings Plc initial pubic offering, and with good reason: it’s the first big tech IPO in more than two years.
A lot is riding on its success. In this case, “success” for investors means demand is high and the price rises in the weeks and months after the IPO.

Still,  initially the deal will mostly be lacking one natural buyer:  Exchange Traded Funds.
Arm will be launching its IPO Thursday on the Nasdaq, selling 95.5 million shares at $51, the high end of the expected price range of $47-$51.
Tech investors increasingly use ETFs to gain exposure to broad tech sectors, and subsectors, like semiconductors.
However, some investors who would like to get immediate exposure to the Arm IPO through ETFs may be disappointed.
ETF indexes have inclusion rules
ETFs are generally a desirable target for corporations to sell stock to because the ownership base skews toward passive and long-term ownership.

However, this particular IPO highlights several difficulties that even large companies like Arm have in acquiring a broader ownership base through ETFs.
For the most part, ETFs are backed by indexes. These indexes have rules that must be carefully adhered to in order to qualify for inclusion.
Unfortunately, partly due to Arm’s own decisions and partly due to the way the major indexes are constructed, ARM initially appears to be ineligible for the largest ETFs.
Problem #1: Arm is not in the S&P 500
The largest index provider is S&P Global. To be included in broad technology ETFs like the SPDR Technology ETF (XLK), which tracks the S&P 500 Technology index, a stock must first be in the S&P 500, which Arm is not. 
The first problem is that Arm is not a U.S. company, it’s British — which generally would exclude it from the S&P indexes.
“It is unlikely it would be included in the S&P 500 given its domicile is in the UK,” Matt Bartolini, head of SPDR Americas Research at State Street Global Advisors, told me. “That would exclude it from inclusion out of the gate.”
State Street runs a large suite of ETF products that are tied to S&P indexes, including the largest ETF in the world, the SPDR S&P 500 ETF (SPY).
Howard Silverblatt at S&P Global also noted that S&P requires a stock to have traded for one year and have four consecutive quarters of profitability to be considered for inclusion in the S&P.
Next problem: a free float below 10% 
Many tech companies now routinely float very small amounts of stock (10%-15% of the shares outstanding), because restricting supply increases the chance for higher prices. 
But Arm appears to be particularly parsimonious, floating roughly 9.3% of the company, according to Renaissance Capital. 
That is another problem for many ETFs, which generally require that a company float 10% or more of the shares to be eligible for inclusion.
That’s the case with the S&P indexes, Bartolini tells me, as well as the largest semiconductor ETF, the Van Eck Semiconductor ETF (SMH), which also requires a free float of 10% or more. 
Van Eck CEO Jan Van Eck told CNBC on Monday that his firm was still evaluating whether Arm would be eligible for inclusion in his ETF. 
Other index firms used by ETFs have float requirements as well. Todd Sohn, who covers ETFs at Strategas, tells me that Vanguard Total U.S. Market (VTI), which uses the CRSP U.S. Total Market Index, also requires a 10% float for fast-track IPOs.
There are ways to get the float above 10%. First, SoftBank could exercise the greenshoe, an optional over-allotment of stock which could add an additional 15% of shares, which would put them just over a 10% float. 
When would that happen? “In general, it’s not announced in connection with the pricing, though it can be,” Matt Kennedy from Renaissance Capital told me. “It can also be disclosed a couple days afterward when they announce the closing. Or, at the very latest, a month or so afterward in an 8-K or 10-Q filing.” 
Another way is simply to sell additional shares after the six-month lockup period expires. 
Potential ETF buyers: Nasdaq-100 ETF, IPO ETFs 
There are some potential ETF buyers. 
For example, Arm may be eligible to enter the Nasdaq-100, the top 100 non- financial stocks in the Nasdaq, because that index has no float or market capitalization requirements. The Nasdaq-100 is reconstituted every December. 
The Invesco Nasdaq-100 ETF (QQQ) which uses the Nasdaq-100 index as its benchmark, is one of the largest ETFs in the U.S.
Other ETFs that specialize in buying IPOs are potential Arm holders, but their buying power is relatively small.
The Renaissance Capital IPO ETF (IPO), a basket of recent IPOs, requires a free float of only 5%, so Arm potentially is eligible for inclusion there.
However, Nate Geraci of the ETF Store cautioned against trying to play IPOs in this manner.
“I’m simply not a fan of investors attempting to play IPOs in the first place,” he told me.
“One of the benefits of being an ETF investor is that you don’t have to worry about company-specific events such as this. Investors should obviously understand what’s going on underneath the hood of any ETF they own, but I would dissuade anyone from buying an ETF simply because it has an allocation to the latest hot IPO.” More

A visitor does not have to look far for signs of India’s property resurgence. Cranes dot the skylines of Delhi, Hyderabad and other cities. In Bandra, a swish suburb of Mumbai, more than 100 buildings are being redeveloped. Across the country, the number of new projects has hit a level last seen in 2012. Pre-sales by big developers are rising at double-digit rates.Behind the increasingly frenetic activity are all the catalysts you would expect in India: demand from the country’s growing population of well-to-do people, insufficient supply and deterioration of existing buildings in the harsh climate. But if the catalysts have not changed, the underlying structure of the market very much has. Attempts by Narendra Modi’s administration to clean up after a property crash in the mid-2010s seem to be paying off.Before the crash, India’s property industry had a rakish edge. An army of small developers had emerged who were known for sharp suits, Bollywood ties and, beneath their glitz, lots of grit. Stories spread of money derived from padded construction bills and dodgy bankers, along with complicated land purchases routed via family members. Later, court cases provided evidence that such tales might not have been fanciful. As a result of corruption, projects were derailed, people waited years for flats and demand for properties fell.Among the changes introduced by Mr Modi’s government in 2016 were requirements for developers to pay above-market interest rates on deposits for flats in delayed projects, creating an incentive for completion. Diverting deposits for different projects was banned. Financial institutions were pressed to tighten lending and monitoring. The clean-up is far from complete: in the state of Maharashtra, home to Mumbai, officials recently noted that 308 projects involving 60 firms are in some stage of insolvency. But slowly bankruptcies are becoming less common.After a period of stagnation, developers with plausible claims to fulfil projects have seen their valuations soar over the past three years: Delhi Land & Finance from $5.1bn to $15.8bn, Godrej Properties from $3bn to $5.5bn and Oberoi Realty from $2bn to $5bn. Confidence is returning to the broader market, too. Data tracked by Morgan Stanley, a bank, and jll Research, a consultancy, indicate that purchases in the most recent quarter were a fifth higher than the average over the previous year. Activity has been especially strong in Bangalore, Hyderabad, Mumbai and Pune.In the same way a depressed residential market can have a broader impact on a country’s economy—as is supremely evident in China at the moment—the opposite is true as well. The current healthy housing market in India helps explain why growth has remained strong, and the stockmarket registered large gains, despite a slowdown in exports and crucial industries, not least technology. Construction in India employs more than 50m people and comprises 7% of gdp. The property industry is a big customer for cement, steel, glass and white goods, along with credit. Past problems may have rightfully cast the sector in a negative light. Now, much like Mumbai’s towers, it is on the up. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

People are mostly pleased by the return of normal life after covid-19. In America, though, borrowers of student loans will miss one aspect of the pandemic. Sitting on $1.6trn of debt owed to the government, they have enjoyed a break from both repayments and interest since March 2020. The holiday is now over. Interest on student loans started to accrue again this month; repayments will resume in October. Given that there are about 43m borrowers, this will drag on the American economy.image: The EconomistExactly how big the drag will be is a matter of debate. In 2017 the Federal Reserve calculated that the average monthly payment on student debt was $393; other estimates put it closer to $250. Cash has already started flooding into the Treasury as some rush to pay off their debts (see chart). Multiplied by all borrowers, the higher average would add up to a total monthly repayment of $17bn, or about 1% of household consumption. Assuming that only part of the repayments comes from savings, that would imply a cut to America’s quarterly annualised growth rate of 0.7 percentage points—or a third of its annualised pace in the first half of this year.Yet such a drag should be viewed as an upper bound. Students in university need not repay loans, reducing the number of borrowers facing an imminent crunch. Other deferrals are also available—such as for those in the armed forces. In 2019 the Fed calculated that three in ten borrowers did not need to make monthly payments.Moreover, the Biden administration has introduced a new repayment plan that expands a previously existing programme for reducing the debt burden on poor Americans. Borrowers making $32,800 a year or less will be exempted from payments. Totted up, analysts at Capital Economics, a consultancy, reckon that the bill to households will work out at $6bn or so a month—closer to shaving off about 0.3 percentage points from America’s growth.Even this drag will be felt when coupled with other looming hits to consumers. At long last Americans are running down savings from the pandemic. The federal government may be on the brink of a temporary shutdown because of political gridlock. And high interest rates are heaping pressure on borrowers: the delinquency rate on credit cards has reached its highest in a decade. For now, America is on track for a robust third quarter, with some indicators even pointing to annualised growth of above 5%. But the resumption of student-loan payments, combined with the other headwinds, may make for a weaker fourth quarter. The median forecast of economists is just 0.6% annualised growth, according to Blue Chip, a survey of estimates.By next year, student-loan payments will drop out of growth calculations, because monthly bills will be part of the baseline. Yet for folk struggling to make payments, the holiday will be difficult to forget. According to Dan Collier of the University of Memphis, who studies the impact of student debt, many borrowers saved money to buy a first home or decided that they could afford to have more children.Although some still cling to hope that the Biden administration may revive a plan to forgive up to $20,000 per borrower after it was blocked by the Supreme Court in June, the political and legal obstacles are formidable. The more likely scenario is that student-debt payments will proceed much as they did before the pandemic: month after month, for years, until graduates have paid down their tuition costs. Normal life is such a drag. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More