Arm Aims for $52 Billion Valuation in Year’s Biggest U.S. Stock Market IPO

Arm Aims for $52 Billion Valuation in Year's Biggest U.S. Stock Market IPO

SoftBank Group’s chip design subsidiary, Arm, is set to embark on the largest U.S. stock market flotation of the year, targeting a valuation of over $52 billion in its initial public offering (IPO). This move comes after SoftBank’s recent acquisition of the remaining 25% stake in Arm from its Vision Fund for $64 billion, signaling a slight reduction in valuation expectations.

The IPO will involve the sale of 95.5 million American depository shares (ADS) at a price range of $47 to $51 per share. This could potentially raise up to $4.87 billion if the offering is priced at the upper end of the range. SoftBank, despite the lowered valuation, stands to benefit more from this IPO than its previous $40 billion deal to sell Arm to Nvidia Corp, which was abandoned in the face of antitrust opposition.

Investors and industry watchers are closely monitoring how Arm manages its relationship with its China business, especially amid the ongoing technology tensions between China and the United States. Jamie Mills O’Brien, portfolio manager at British fund manager Abrdn, expressed a more favorable view of SoftBank’s valuation in the IPO compared to earlier discussions, highlighting the importance of navigating geopolitical challenges.

Once the offering concludes, SoftBank will retain a 90.6% stake in Arm’s ordinary shares, although it will not receive any proceeds from the IPO. Arm has successfully attracted major clients, including tech giants like Apple, Nvidia, Alphabet, Advanced Micro Devices, Intel, and Samsung Electronics, to invest in its IPO. These “cornerstone investors” have collectively indicated interest in purchasing $735 million worth of the ADS offered.

Arm’s IPO, the largest in New York since Rivian’s in late 2021, is anticipated to inject optimism into the global IPO market, encouraging other tech startups to go public. The success of Arm’s IPO could serve as a signal of renewed investor enthusiasm for technology companies.

This momentous occasion is not only significant for Arm but also for SoftBank, as it rallies support from prominent technology companies. Arm’s designs power over 99% of the world’s smartphones, underscoring its importance in the tech ecosystem.

Arm’s revenue is predominantly generated through royalty fees based on the sale price of customer’s Arm-based chips or a fixed fee per chip. While its sales for the year ended March 31 were impacted by a decline in global smartphone shipments, Arm remains a profitable entity. This profitability is expected to alleviate investor concerns, setting it apart from many high-growth tech firms that debut with lofty valuations but later struggle.

Founded in 1990 as a joint venture between Acorn Computers, Apple Computer, and VLSI Technology, Arm previously traded on the London Stock Exchange and Nasdaq from 1998 to 2016 before being privatized by SoftBank in a $32 billion deal.

Leading financial institutions, including Barclays, Goldman Sachs, JPMorgan Chase, and Mizuho Financial Group, are acting as underwriters for the IPO. Should they exercise their option to purchase additional shares in full as part of the “greenshoe option,” the total IPO amount could reach $5.2 billion.

Arm’s listing is expected to take place on the Nasdaq Global Select Market under the ticker symbol “ARM.” This event is poised to shape the future landscape of chip design and technology markets, with Arm at the forefront of innovation and growth.

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Written by Bintano

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