SoftBank’s Arm Aims for $52B Valuation in IPO as Tech Giants Rally
Chip designer SoftBank Group‘s Arm is gearing up for its much-anticipated initial public offering (IPO) in the U.S. stock market. The company is seeking a valuation of over $52 billion, making it the largest IPO of the year.
Arm plans to offer 95.5 million American depository shares for $47 to $51 each, aiming to raise up to $4.87 billion at the top end of the range. This valuation is a step down from the $64 billion SoftBank paid for its additional 25% stake in the company last month.
Despite the decrease in valuation, investor interest in the IPO remains strong. Arm’s clients are eager to expand their business ties with the chip designer and secure a competitive advantage in the market.
Following the completion of the IPO, SoftBank will hold a 90.6% stake in Arm’s ordinary shares, and it will not receive any proceeds from the offering. However, Arm has managed to attract major clients as investors, including Apple, Nvidia, Alphabet, Advanced Micro Devices, Intel, and Samsung Electronics.
These clients, referred to as cornerstone investors, have shown interest in purchasing a combined $735 million of the shares being offered. Arm’s listing is expected to energize the global IPO market and encourage other startups to go public, signaling the resurgence of investor appetite for technology companies.
The IPO will also be a significant milestone for SoftBank, as it gathers support from prominent technology names. Arm’s designs currently power more than 99% of the world’s smartphones.
Arm is a profitable company, setting it apart from other high-growth tech firms that often debut with lofty valuations only to decline. The chip designer generates a large portion of its revenue through royalty fees based on the average selling price or fixed fee per chip of its customer’s Arm-based products.
In the fiscal year ending on March 31, Arm’s sales declined to $2.68 billion primarily due to a slump in global smartphone shipments. However, its profitability is expected to ease investor concerns.
Established in 1990 as a joint venture between Acorn Computers, Apple Computer, and VLSI Technology, Arm traded on the London Stock Exchange and Nasdaq until it was taken private by SoftBank in 2016 at a valuation of $32 billion.
The IPO’s lead underwriters include Barclays, Goldman Sachs, JPMorgan Chase, and Mizuho Financial Group. If the underwriters exercise their right to purchase additional shares through the greenshoe option, the total IPO amount could reach $5.2 billion.
Arm has engaged 28 banks for the IPO, with underwriter fees distributed equally among the top four banks. It plans to trade on the Nasdaq Global Select Market under the symbol ARM.
Overall, Arm’s IPO is expected to make a significant impact on the technology industry. It symbolizes the return of investor appetite for tech companies and the growing interest in expanding commercial ties with the chip designer. As the IPO continues to generate interest, it will undoubtedly shape the future of Arm and the broader market.
