Arm targets valuation of up to $52bn in IPO
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Arm intends to set the cost of its initial public offering at a range of $47 to $51 per share, as stated in an updated document on Tuesday. This move aims to generate a sum of up to $4.9 billion for its present proprietor SoftBank and evaluate the chip designer, based in the United Kingdom, at a potential value of $52 billion.
Arm stated that several key investors, such as Apple, Google, Nvidia, Samsung, Intel, and TSMC, have expressed their intention to acquire Arm shares at the IPO price, with a total value of approximately $735 million.
SoftBank forked out $32 billion to purchase Arm in 2016, however, their most recent objective falls short of the $64 billion estimation inferred not long ago during a deal with their Vision Fund. This particular fund, managed by the Japanese corporation and backed by Saudi Arabia with a staggering $100 billion investment, is the focus of their attention.
SoftBank will retain ownership of 90.6 percent of the company after the IPO is finished, which is projected to conclude next week. The companies will commence their roadshow in New York on Tuesday, where they will present the upcoming initial public offering to potential investors. It is anticipated to be one of the largest IPOs this year.
Furthermore, among the initial group of 10 foundational investors, who were officially announced on Tuesday, are semiconductor manufacturers AMD and MediaTek. Additionally, the group includes Cadence and Synopsys, companies that offer software tools essential for chip design.
Qualcomm, a major player in mobile chipmaking and an important customer of Arm, was not included in the list of key supporters. This comes as both companies are currently entangled in legal battles concerning the licensing of intellectual property.
Before the release of the price range on Tuesday, a few investment managers had doubts about SoftBank's ability to convince investors to shell out $50 billion for a company that had reported stagnant revenues and declining profits leading up to the Initial Public Offering (IPO).
James Anderson, a prominent tech investor from Britain, expressed his view that Arm, under SoftBank's control, has failed to seize numerous prospects, specifically in the area of cloud computing where it could have grown at a faster pace. This might pose a greater challenge than initially anticipated in achieving the desired valuation, despite Arm's strong position in the smartphone market, as noted by Anderson.
"I'm not convinced that Arm is a key player in most of the areas of growth," Anderson stated. "I don't perceive it as having a specific expertise in AI-related advancements."
Barclays, Goldman Sachs, JPMorgan Chase, and Mizuho are at the forefront of a group of 28 underwriters for the initial public offering (IPO). Raine Group, a small investment bank with connections to SoftBank and one of Arm's board members, Jeffrey Sine, is taking the lead in providing advice for the transaction.
