Arm Holdings, the semiconductor unit of SoftBank Group, has filed for a highly anticipated initial public offering (IPO) in the US. This IPO is set to be the largest one in the country this year, with Arm looking to achieve a valuation of $60 billion to $70 billion. The news of Arm’s IPO filing has given a significant boost to the struggling equities markets, marking their biggest lift in almost two years.
In the filing submitted to the US Securities and Exchange Commission, Arm did not disclose the proposed terms for the share sale. However, according to Bloomberg News, the company plans to commence its roadshow in the first week of September and price the IPO the following week. The IPO was initially expected to raise between $8 billion and $10 billion, but this target may be adjusted as SoftBank has decided to maintain a larger stake in Arm after acquiring Vision Fund’s holdings.
The IPO is being led by prominent financial institutions such as Barclays, Goldman Sachs Group, JPMorgan Chase, and Mizuho Financial Group. Additionally, 24 other underwriters are listed below the top-tier firms. If successful, this listing will be the largest in the US since Rivian Automotive’s $13.7 billion offering in October 2021, and it could even rival the tech industry’s record-breaking IPOs by Alibaba Group and Meta Platforms (formerly known as Facebook).
The potential success of Arm’s IPO would not only provide relief for SoftBank founder Masayoshi Son, who faced a record loss of $30 billion last year, but it could also encourage other start-ups to proceed with their own IPO plans. Companies like Instacart and Klaviyo may be inspired to follow suit, albeit with possible delays.
The target valuation of $60 billion to $70 billion for Arm highlights the increasing market demand for technologies associated with artificial intelligence chips and generative AI. Although Arm’s technology is already widely used in smartphones, its presence in the industry has been relatively unacknowledged. The company sells blueprints necessary for designing microprocessors and licenses instruction sets that govern software program interactions with these chips. Arm’s technology’s power efficiency has been vital for its ubiquity in phones, where battery life is crucial.
Under the leadership of CEO Rene Haas, who assumed the position last year, Arm is exploring opportunities beyond the smartphone market, which has experienced stagnation in recent years. Haas aims to expand into more advanced computing, particularly data center chips for cloud computing and artificial intelligence applications. Processors for this market segment are among the most lucrative in the industry, but also come with significant costs.
Amazon, for example, has embraced Arm-based chips for its Amazon Web Services due to their superior energy efficiency and economic advantages. These chips are used by approximately 40,000 AWS customers. In the IPO filing, it was confirmed that SoftBank will retain controlling ownership of Arm once it goes public. The Vision Fund’s 25% stake in Arm was acquired by SoftBank for $16.1 billion, as stated in the filing.
Arm’s revenue experienced a slight decline of approximately 1% in its last fiscal year, according to the filing. Sales for the year ending on March 31 amounted to $2.68 billion. It should be noted that the figures mentioned are still subject to change.
Arm plans to list its shares on the Nasdaq Global Select Market under the symbol ARM. As the IPO progresses, market watchers will be closely tracking Arm’s performance and the implications it may have for the broader technology industry and investor sentiments.
In conclusion, Arm Holdings’ filing for the year’s largest US IPO, with a targeted valuation of $60 billion to $70 billion, has injected much-needed optimism into struggling equities markets. This IPO holds the promise of being a significant success and could potentially influence the IPO plans of numerous technology start-ups. Arm’s move into advanced computing and its partnerships with market giants like Amazon position it favorably for future growth. As the IPO journey unfolds, investors and industry observers will be eagerly awaiting the outcome and its potential impact on the technology sector at large.
