By Noel Randewich and Lewis Krauskopf
(Reuters) - Arm Holdings (NASDAQ:ARM)' stock on Thursday dipped for the first time below its initial public offering price, while short sellers appeared to be betting against the chip designer just a week after its Wall Street debut.
Dropping for a fifth straight session, shares of SoftBank-controlled Arm closed down 1.4% at $52.16 after sinking as low as $49.85, well below the $51 price set in its IPO on Sept. 13.
Shares of Klaviyo which debuted on Wall Street on Wednesday, finished up 2.9% at $33.72 versus the marketing automation firm's $30 IPO price.
Grocery delivery app Instacart, formally known as Maplebear, ended Thursday up 1.8% at $30.65, marginally above the $30 price set in its IPO earlier this week.
Arm's loss on Thursday was in line with a 1.8% drop in the Nasdaq as investors fretted that the Federal Reserve's monetary policy will remain restrictive for longer than previously expected.
But the weak performances of the three companies' shares since their highly anticipated market debuts add to doubts about whether a hoped-for revival in IPOs will materialize after a draught of over 18 months.
Suggesting short sellers are betting against Arm, about 14 million of its shares were on loan, equivalent to 8% of the stock's free float, data and analytics company Ortex said. That was up from roughly 5% a day earlier.
Short sellers borrow stocks to short them, and the relationship between shares on loan and shorted is normally close, according to Ortex.
Arm shares appear highly shorted compared to other recent IPOs. Seven days after their respective IPOs, which is the current timeline for Arm, software company Simpple had 3.1% of its free float on loan, while beauty products seller Oddity Tech had only 0.3% of its float on loan, according to Ortex. "The short interest at the moment is one of the highest (recently) we have seen a week after an IPO," said Ortex co-founder Peter Hillerberg. "It seems to indicate a negative view from some market participants."
Wall Street's steep sell-off in 2022, along with rising interest rates and fears of a potential U.S. recession, crushed valuations of companies planning to list their shares.
The 10 biggest U.S. initial public offerings of the past four years were down an average of 47% from the closing price on their first day of trading, according to a Reuters analysis of LSEG data earlier this month.