SoftBank’s Arm Seeks $52 Billion Valuation in Landmark IPO

SoftBank Group’s Arm, the renowned chip designer, has announced its ambitions to attain a valuation exceeding $52 billion in its upcoming initial public offering (IPO).
Arm chip businessThis move signals the commencement of marketing efforts for what is anticipated to be the most significant U.S. stock market flotation of the year, Reuters news report said.

In a regulatory filing, Arm disclosed its intention to offer 95.5 million American depository shares, priced between $47 to $51 each, with a goal of raising up to $4.87 billion at the upper end of the price range. This valuation represents a notable decrease from the $64 billion valuation that SoftBank acquired just last month for the remaining 25 percent stake in the company, previously held by its $100 billion Vision Fund.

Even with this adjustment, SoftBank’s IPO valuation seeks to outperform its earlier $40 billion deal with Nvidia Corp, which was abandoned in the face of opposition from antitrust regulators.

Jamie Mills O’Brien, a portfolio manager at British fund manager Abrdn, expressed his approval of SoftBank’s valuation approach, deeming it “more palatable than initially discussed.” O’Brien also highlighted the importance of monitoring Arm’s relationship with its China business in the context of the ongoing technological rivalry between China and the United States.

Upon the IPO’s conclusion, SoftBank will retain 90.6 percent of Arm’s ordinary shares, although it will not receive any proceeds from the offering.

Several major tech companies, including Apple, Nvidia, Alphabet, Advanced Micro Devices, Intel, and Samsung Electronics, have committed to investing in Arm’s IPO. These “cornerstone investors” have collectively shown interest in purchasing a total of $735 million worth of the American depository shares being offered.

Arm’s listing, the largest in New York since Rivian in late 2021, is poised to inject fresh vitality into the global IPO market, potentially encouraging other startups to embark on their own public offerings. Its success is seen as an indicator of renewed investor appetite for technology firms.

This milestone IPO is not only significant for Arm but also for SoftBank, as it rallies support from prominent technology players. Arm’s designs currently power over 99 percent of the world’s smartphones.

Arm’s revenue primarily stems from royalty fees based on the selling price of Arm-based chips or fixed fees per chip. However, its sales for the fiscal year ending March 31, 2023, were impacted by a decline in global smartphone shipments, falling to $2.68 billion.