SoftBank Group Corp.’s Arm Holdings Ltd. plans to raise as much as $4.87 billion in the chip designer’s long-awaited initial public offering, marking a less ambitious IPO that had been expected A public offering would generate about twice as much money.
Arm said in a filing with the U.S. Securities and Exchange Commission on Tuesday that it will offer 95.5 million American depositary shares at prices ranging from $47 to $51 each. The deal would value Arm at up to $54.5 billion, according to Bloomberg calculations. The underwriters have the option to purchase up to 7 million additional shares.
While Arm had previously aimed to raise $8 billion to $10 billion, that target was at least partially lowered when SoftBank decided to buy the 25% stake held by its Vision Fund and then take a larger stake in the company. After the IPO, SoftBank will still control about 90% of Arm, the document said.
Even at the bottom of the stock offering range, the IPO would still be the world’s largest this year, surpassing the $4.37 billion listing of Johnson & Johnson consumer health spinoff Kenvue Inc. Arm’s listing could also be a catalyst for dozens of tech IPOs. Startups and other companies planning to go public in the U.S. are mired in the deepest and longest slump in listings since the 2009 financial crisis.
Online grocery delivery company Instacart Inc., marketing and data automation provider Klaviyo, Vietnamese internet startup VNG Ltd. and shoe manufacturer Birkenstock is one of those companies that has filed or is seeking an IPO.
Arm is a key part of the chip supply chain, designing semiconductors that go into most of the world’s smartphones. Arm had previously sought a valuation of $60 billion to $70 billion in the IPO. The SoftBank Vision Fund deal values Arm at more than $64 billion, according to Arm filings.
The company could still raise more or less money based on investor demand during the roadshow.The company is considering pricing its stock September 13 The stock will start trading the next day.
Ten of Arm’s customers — including Apple Inc., Nvidia Corp., Advanced Micro Devices Inc., Alphabet Inc.’s Google, Intel Corp., MediaTek Corp., TSMC Partners Ltd., Synopsys Inc. and Cadence Design Systems Inc. — — has agreed to be a cornerstone investor in the offering and expressed interest in purchasing up to $735 million in shares. TSMC Chairman Mark Liu told reporters in Taipei that the chipmaker is still considering the investment and will make a final decision this week.
Arm has also extended its long-term agreement with Apple beyond 2040, the documents show. The chip designer said the move would continue “our longstanding relationship with Apple and Apple’s access to Arm architecture.”
The agreement represents a commitment from one of the largest tech companies to Arm at a time when other customers have shown interest in rival standards.Qualcomm, NXP Semiconductors NV, and other chipmakers has been developing A technology called RISC-V could reduce the industry’s reliance on Arm.
The Arm offering was led by Barclays Plc, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Mizuho Financial Group Inc., with 24 other underwriters The dealer is under the top underwriter. Arm plans to change its name to “Arm Holdings Plc” before it begins trading under the ARM symbol on the Nasdaq Global Select Market.
A successful Arm listing would provide a windfall for SoftBank founder Masayoshi Son, whose Vision Fund lost a record $30 billion last year.
Arm’s target valuation reflects a belief that it will benefit from the boom in artificial intelligence chips and generative AI — an industry shift that has helped Nvidia achieve a $1.2 trillion valuation.
Although Arm’s technology is found in nearly all smartphones, it’s not widely known among consumers. Arm sells the blueprints needed to design microprocessors and licenses technologies called instruction sets that determine how software programs communicate with those chips. The power efficiency of Arm technology makes it widely used in mobile phones where battery life is critical.
Rene Haas, who took over as Arm’s chief executive last year, is trying to expand into a smartphone market that has stagnated in recent years. He has his sights set on more advanced computing, especially chips for data centers and artificial intelligence applications. Processors in this market are among the most expensive and profitable in the industry.
To keep pace with artificial intelligence, companies will need the right chips to run complex software. Arm says each processor it designs will accelerate the artificial intelligence and machine learning technologies it supports. Its processors already run these technologies, and the company has begun adding new features to make the algorithms run faster.
The entire chip industry is still dealing with declining sales, compounded by excess inventory.
Arm’s revenue fell about 1% to $2.68 billion in the fiscal year ended March 31, according to its filing. The company’s net income jumped to $549 million in fiscal 2022 from $388 million the previous year, before falling to $524 million this year.
Arm, founded in 1990 as a joint venture between Acorn Computers, Apple and VLSI Technology, is returning to the public market. From 1998 until 2016, the company was listed on the London Stock Exchange and Nasdaq before SoftBank bought the business for $32 billion.
SoftBank had previously tried to sell Arm to Nvidia for $40 billion, which would be the largest acquisition in the chip industry. But the acquisition was opposed by regulators and Arm’s own customers, and Nvidia walked away from the acquisition last year. SoftBank then began its IPO plans.
Arm’s listing is expected to be the largest U.S. IPO since electric-car maker Rivian Automotive Inc.’s $13.7 billion offering in October 2021. The IPO would also rank among the largest tech IPOs ever, though still well short of the two biggest: Alibaba Group Holding Ltd.’s $25 billion offering in 2014, and Meta (then known as Facebook Inc.). Inc.) issued $16 billion in 2012.
Svlook
