Arm Holdings, the British chip design firm, has announced its initial public offering (IPO) price ahead of its listing on the Nasdaq Composite index later this week. The company, which dominates the smartphone industry, has set a price of $51 per share for its IPO, valuing Arm at $54.5 billion on a fully-diluted basis.
Arm’s decision regarding the share price was reached following discussions with its underwriters. Initially considering a higher price of $52 per share, the company ultimately settled on the lower amount. The IPO is expected to generate around $5 billion in sales for SoftBank, Arm’s current owner.
Arm, founded in 1990, focuses on essential circuit designs rather than chip manufacturing. It is renowned as the leading supplier of chip circuit designs for smartphone makers, responsible for more than 99% of the world’s smartphone chips. However, the company is looking to expand its presence in other markets such as automotive, cloud computing, and computer networks.
Despite reporting flat revenue in its latest fiscal year due to a decline in the smartphone market, Arm is optimistic about growth opportunities in emerging markets. It anticipates significant expansion in the data center server processor, data processing unit, SmartNIC chip, and automotive chip industries. Additionally, Arm aims to capitalize on the rising demand for artificial intelligence (AI) technologies, which require powerful computing power.
However, Arm acknowledges that the AI market also poses potential risks. Not all AI and machine learning technologies may be compatible with the central processing units it designs, potentially impacting the company’s revenue.
Analysts believe that the money raised from Arm’s IPO could be used to accelerate research and development efforts, particularly in reducing chipmaking costs. The cost of designing a new semiconductor using a 7-nanometer process currently stands at $249 million but is expected to rise to $725 million for chips based on a 2nm process.
Arm’s IPO is highly anticipated and will be closely watched as an indicator of market interest in new stocks. The IPO market has been sluggish recently due to high interest rates and inflation. The success of Arm’s IPO could have positive implications for other technology firms planning their public debuts, such as Instacart Inc. and Klaviyo Inc.
In conclusion, Arm Holdings’ $51 IPO price aims to solidify its dominance in the smartphone chip market. The company’s chip designs have a significant market share, and it aims to expand into new industries such as automotive and AI. Arm’s IPO will be crucial in gauging investor interest in new stocks, and its performance could influence upcoming tech IPOs.