Arm, a subsidiary of SoftBank Group, is expecting a valuation of over $52 billion in its upcoming initial public offering on the New York Stock Exchange, which is expected to be the biggest tech launch of the year.
The company’s chip designs power more than 99 percent of the world’s smartphones, with a client list that includes the world’s biggest tech giants.The British government had originally hoped that Arm would return to the LSE, but instead opted for New York, in what was seen as a major blow to the United Kingdom’s vision to become one of the world’s leading tech hubs.
Key Chipmaker to Relaunch Listing on Wall Street
In a Sept. 5 regulatory filing, the the British tech firm is offering 95.5 million American depository shares (ADS), as a foreign issuer, for $47–51 apiece and is looking to raise up to $4.87 billion at the higher end of the scale on top of its $52 billion valuation.However, the latest valuation is lower than the $64 billion valuation at which SoftBank acquired the 25 percent stake it did not directly control, from its own $100 billion Vision Fund in August, reported Reuters.
The valuation is still better than Softbank’s $80 billion deal to sell Arm to Nvidia Corp, which fell through last year amid tough opposition from U.S. and European Union antitrust regulators.
Only 9.4 percent of Arm’s shares will be freely traded on Wall Street, while its Japanese parent is expected to own roughly 90.6 percent of the company’s outstanding shares after the completion of the IPO.
According to Reuters, Arm has brought on board several of its top customers as investors for its IPO, including Apple, Nvidia, Alphabet, Advanced Micro Devices, Intel, and Samsung Electronics.
These key investors will individually have the right to purchase up to an additional 7 million ADSs, worth up to $735 million, which would reduce SoftBank’s stake in Arm to 89.9 percent as part of a “greenshoe option,” raising the IPO amount to $5.2 billion.Meanwhile, some have called for more shares to be opened up to public investors.
Although Arm is utilizing a total of 28 banks for the IPO, the company said it did not pick a traditional “lead left” bank and will evenly divide underwriter fees among the four lenders.
Factors like the war in Ukraine and a spike in interest rates worldwide have led to a massive slump in tech valuations last year, leading technology firms to curtail investments.Investors are hoping that the new listing will give a boost to an IPO market that has been sluggish since last year after electric vehicle maker Rivian’s massive launch in late 2021.
Arm’s launch is expected to fuel other tech startups planning to go public, as a success would signal new interest in the sector.
Arm Sees Major Potential in Its Latest Designs
According to company estimates, Arm approximately controls 48.9 percent the market for semiconductor designs.
The firm’s processors and software platforms are integrated into more than 250 billion chips worldwide, ranging from sensors and smartphones to supercomputers.
Arm earns most of its revenues through royalty fees based on the average selling price of its chip designs acquired by its customers, or via a fixed fee per chip.
The firm’s sales fell to $2.68 billion due to a slump in global smartphone shipments for the year ended March 31.
The chipmaker anticipated huge potential revenue opportunity for its technology, which had a total addressable market (TAM) of $202.5 billion in 2022, according to its IPO filing.
Arm’s sees its TAM rising to $246.6 billion by the end of the calendar year ending on Dec. 31, 2025, which would be a compound annual growth rate of 6.8 percent.
