ResearchThree Things (9/18)

Three Things (9/18)

Sep 18, 2023

"The short successes that can be gained in a brief time and without difficulty, are not worth much." – Henry Ford


Armed and ready

Shares of Arm surged in its highly anticipated stock-market debut Thursday, in a sign of the reviving fortunes of an IPO market that has been in the doldrums for most of the past two years. Arm’s debut is a win for SoftBank, now valued at nearly $69 billion on a fully diluted basis, well above the roughly $32 billion SoftBank acquired it for in 2016.

The market reaction to the biggest offering of the year should be met with a sigh of relief from investors, as well as companies waiting in the wings to go public and Wall Street firms that reap oversized fees from underwriting IPOs. We tend to believe it’s difficult to isolate the IPO appetite exclusively from the Arm offering because the frenzy surrounding artificial intelligence is likely contributing to some of the early success. Time will tell, as others slowly make the jump into the public markets. (WSJ)

EY 🤝 AI

Consulting firm EY said it completed a $1.4 billion investment into artificial intelligence, the latest among a series of peers to make a billion-dollar announcement regarding the rapidly developing technology. In addition to the $1.4 billion investment, the big four firm said it has created its own large language model and plans to train its entire global workforce of 400,000 on AI. 

We think it’s plausible to see the firm focus on helping its client navigate the vast uncertainty over privacy and data security when it comes to AI. Whether it be an audit type structure or teams of consultants hired to implement "industry standards", the opportunity is available for the taking. With a deep rolodex, the company could easily lean into the trend and likely find success in doing so.

On strike

The United Auto Workers strike against the Detroit Three automakers entered its third day on Sunday with no immediate resolution on the horizon. About 12,700 UAW workers remain on strike as part of a coordinated labor action targeting three U.S. assembly plants - one at each of the Detroit Three automakers (Ford, GM, and ​​Stellantis) after the prior four-year labor agreements expired on Friday morning. 

The coordinated strike comes at a time when Americans' approval of labor unions is at its highest point in decades even as membership in unions remains largely unchanged. The strike will certainly drive up car prices and likely have a short term impact on the share prices of aforementioned manufacturers. In a time where their business model is being disrupted by the transition to electric, a long-term shutdown could be a meaningful set back for the companies that are already playing from behind.

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