Whether Arm’s return to the public markets goes smoothly and paves the way for other upcoming listings won’t be known until the chip designer’s shares begin trading on Thursday. According to calculations by Bloomberg, Arm is valued at approximately US$54.5 billion based on the IPO price.

According to Bloomberg, the IPO was oversubscribed more than 10 times, which is good for Arm. That means investor interest exceeded supply in the offering price range of $47 to $51 per share, potentially helping to push the stock price higher once trading begins.

In setting the price for the IPO, SoftBank founder, Chairman and Chief Executive Officer Masayoshi Son said he was unwilling to undercut that demand, even if it meant setting aside money.

At Wednesday’s final pricing meeting, some bankers and executives made the case for raising the price, with some of the debate centering on whether $52 was reasonable, people familiar with the matter said. The people spoke on condition of anonymity because the meeting was private. . Son joined the discussion and chose $51, saying it wasn’t worth risking a healthy debut for an additional gain of around $100 million, they said.

long bet

Son’s approach to the IPO reflects his continued long-term bet on Arm, whose chips are used in most of the world’s smartphones. Arm will also benefit from the boom in artificial intelligence chips and generative AI – an industry shift that has helped push Nvidia Corp.’s market value to more than $1.1 trillion.

Arm was founded in 1990 as a joint venture between Acorn Computers, VLSI Technology and what was then Apple Computer Inc., and was listed on the London Stock Exchange and Nasdaq from 1998 to 2016, when it was acquired by SoftBank for $32 billion the business.

In 2020, SoftBank tried to sell Arm to Nvidia for $40 billion, but failed. The move angered Arm customers, who did not want to see the company that provides basic technology for the mobile phone industry fall into the hands of a single buyer.

IPO Pivot

With the deal on hold, Arm turned to an IPO after seeking a valuation of $60 billion to $70 billion, Bloomberg reported.

While Arm had previously aimed to raise $8 billion to $10 billion in the listing, that goal was at least partially lowered due to SoftBank’s decision to buy about 25% of its Vision Fund’s shares, a deal that would Valuation exceeds $64 billion. Arm-based files.

SoftBank also decided to hold a majority stake in Arm, leaving just 10% for investors, which include some of Arm’s largest customers. As part of the IPO, Arm set aside more than $700 million in shares for Intel Corp., Apple Inc., Nvidia Corp., Samsung Electronics Co. and TSMC.

The underwriters have the option to purchase up to 7 million additional shares.

The IPO is the world’s largest this year, surpassing the $4.37 billion listing of Johnson & Johnson consumer health spinoff Kenvue Inc. Arm’s IPO could also be a catalyst for dozens of tech startups and other companies planning to list in the United States. plunged into its deepest and longest listing trough since the 2009 financial crisis.

Online grocery delivery company Instacart Inc., marketing and data automation provider Klaviyo, Vietnamese internet startup VNG Ltd. and shoemaker Birkenstock Holding Ltd. have all filed to go public.

Arm’s listing is the largest U.S. IPO since electric carmaker Rivian Automotive Inc.’s $13.7 billion offering in October 2021. The IPO would also rank among the largest ever in the tech industry, though still far behind Alibaba Group Holding Ltd.’s $25 billion 2014 offering and Meta Platforms Inc., then known as Facebook Inc.)’s initial offering of $16 billion in 2012.

Although Arm’s technology is used in nearly all smartphones, it’s not widely known among consumers. Arm sells the blueprints needed to design microprocessors and licenses the technology called instruction sets that determine how software programs communicate with those chips. The efficacy of Arm technology makes it widely used in mobile phones where battery life is critical.

Chip collapse

The frenzy around artificial intelligence has fueled gains in chip stocks this year, sending the Philadelphia Semiconductor Index up 41%. Still, the chip industry as a whole is still dealing with a sales slump that’s further exacerbated by excess inventory.

Arm’s revenue fell about 1% to $2.68 billion in the fiscal year ended March 31, according to its filings. The company’s net profit jumped to $549 million in fiscal 2022 from $388 million the previous year, before falling to $524 million this year.

Barclays, Goldman Sachs Group, JPMorgan Chase and Mizuho Financial Group are Arm’s main products. SoftBank-backed Raine Securities LLC is also serving as a financial adviser to the IPO.

Arm’s shares will trade on the Nasdaq Global Select Market under the symbol ARM.

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