SoftBank’s Arm is an integral part of the chip supply chain and earlier the company had expected to be valued at $60 billion to $70 billion in the IPO
SoftBank Group is anticipating raising almost $4.87 billion in its long-awaited initial public offering. This marks a lower expectation for an IPO as the company anticipated to generate nearly twice that amount. Softbank‘s Arm plans to offer 95.5 million American depositary shares for $47 to $51 each, according to the company filings.
The deal will value SoftBank’s Arm at $54.5 billion at the high end, reports Bloomberg. Underwriters have the option of buying just about 7 million additional shares. The Arm earlier tried to raise $10 billion in the top end and the target was reduced due to sudden changes. SoftBank decided to buy a 25% stake held by its Vision Fund and then hold onto a larger portion of the shares in the company.
According to the official statements, the firm will control about 90% of the Arm’s shares after the initial public offering. Even if we calculate at the bottom of the share-sale range, the company’s IPO would overtake the $4.37 billion listing by Johnson & Johnson consumer health spinoff Kenvue Inc., making it the biggest in the world this year. Arm’s listing could also motivate the IPOs of other firms and startups who planned to go public in the United States and have been stuck during the longest listing since the 2009 financial crisis.
SoftBank’s Arm is an integral part of the chip supply chain and earlier the company had expected to be valued at $60 billion to $70 billion in the IPO. SoftBank’s Vision Fund transaction valued Arm at exceeding $64 billion. Whether the company decides to raise more or less money will be dependent on the investor’s demand. September 13 is the date the company selected to price its shares and the stocks are expected to start trading from the very next day.
Arm has a very large clientele base and some of its customers include Alphabet Inc.’s Google, Intel Corp., MediaTek Inc., TSMC Partners Ltd., Apple Inc., Nvidia Corp., Advanced Micro Devices Inc., Cadence Design Systems Inc., and Synopsys Inc. These companies have also consented to be the main investors and have expressed interest in buying nearly $735 million of the shares. Arm had also extended an agreement with Apple so that the pact lasts beyond 2040. Arm’s offering is led by Goldman Sachs Group Inc., JPMorgan Chase & Co., Barclays Plc, and Mizuho Financial Group Inc. Arm also plans to change its name to ‘Arm Holdings Plc’ before it begins trading on Nasdaq.
Arm’s target valuation shows the expectation that it will benefit from the hype that surrounds generative AI and artificial intelligence chips. This expectation is not completely wrong though, Nvidia received around $1.2 trillion valuation as a result of this industry shift. Arm is not a well-known name among its consumers despite its technology being used in almost all smartphones. Arm basically licenses technology known as instruction set that shows how software programs communicate with those chips. They also sell blueprints required to design the microprocessors.
Arm is also trying to work beyond the smartphone market which has faced difficulties in recent years. The firm is trying to unfold further innovations in advanced computing, especially for AI applications. In order to keep up with the rapid developments in AI, companies will need the proper chip to run the complex software. The company has also started adding new functionalities in order to make everything work faster.
The revenue of Arms fell just about 1% reaching $2.68 billion for the fiscal year ended on March 31. SoftBank had earlier attempted to sell Arm to Nvidia through a deal worth $40 billion. This would have been the largest chip industry takeover. However, the deal didn’t happen since it faced resistance from authorities and Arm’s own customers.