The company is reportedly considering a valuation between $50 billion and $55 billion, which is lower than the $64 billion indicated by its owner, SoftBank, last month
The British computer chip designer Arm is said to have revised down its anticipated valuation as it engages with investors in the lead-up to its highly anticipated stock market debut in New York.
Arm is now aiming for a valuation ranging from $50 billion to $55 billion (£40 billion to £44 billion), marking a reduction from the $64 billion valuation stated by its parent company, Softbank, in a transaction just last month, as initially reported by Reuters.
The Cambridge-based firm, known for its chip designs that power the majority of the world’s mobile phones, is preparing to hold discussions with potential investors in the coming days. This move precedes an initial public offering (IPO) of shares that could potentially occur as early as next week.
Arm has been under the private ownership of the Japanese investment firm SoftBank since 2016 when it was delisted from the London Stock Exchange in a transaction valued at £24 billion. Numerous analysts believe that its current valuation is greater, in part due to the heightened interest in artificial intelligence, which is expected to benefit chip companies.
Arm holds a significant position in the global chip industry. While it doesn’t manufacture chips itself, it provides designs that are essential to several major computing companies globally, including Apple and Samsung, the largest mobile phone manufacturers.
Certain clients of Arm are believed to have expressed interest in acquiring shares to increase their influence over the company. According to Reuters, potential investors in the IPO include Apple, Samsung, chip manufacturers like Nvidia, Advanced Micro Devices, Intel, Cadence, and Alphabet, the parent company of Google. These prospective investors have been reached out to for their responses.
SoftBank, under the leadership of Japanese billionaire Masayoshi Son, has been pursuing opportunities to unlock the worth of its investment for a number of years. A $40 billion agreement to sell Arm to Nvidia was abandoned in 2022 following objections from regulators who were concerned about potential competition issues.
Subsequently, SoftBank has attempted to convince investors that Arm may be valued as high as $80 billion, as reported. In a recent transaction with a fund under its control, SoftBank assessed Arm’s value at $64 billion just last month.
Even with a reduced valuation of $50 billion, the Arm initial public offering (IPO) would stand as the largest since the electric pickup truck manufacturer Rivian’s $70 billion flotation in November 2021.
The Arm listing is occurring during a relatively subdued period for IPOs. Escalating interest rates have caused investors to reevaluate the worth of future earnings, rendering fundraising more challenging. Nevertheless, 28 banks, spearheaded by Barclays, Goldman Sachs, JP Morgan, and Japan’s Mizuho, are set to participate in what is anticipated to be a lucrative fee arrangement aimed at generating interest in the IPO.
The Arm listing is slated to occur on the Nasdaq stock exchange in New York, a hub for numerous major technology firms worldwide. Despite the efforts of UK Prime Minister Rishi Sunak to entice Arm to return to London, where it was formerly a constituent of the FTSE 100 index, the lobbying campaign proved unsuccessful.
Following the IPO, SoftBank may still possess up to 90% of Arm, allowing it to maintain significant influence in an industry that is gaining escalating geopolitical significance amid the competition between the United States and China for supremacy in advanced chip technology. Arm’s filing announcing the forthcoming listing disclosed that it derives a quarter of its revenues from China, rendering it susceptible to shifts in government policies.
