Chip Designing Giant Arm Plans Biggest US Stock Listing in Years
British chip designing giant Arm, owned by Japan’s SoftBank, has announced its plans for a public stock listing in New York, potentially becoming the largest US share offering in years. Arm is renowned for its chip designs used in smartphones worldwide and aims to establish itself as a significant player in the field of artificial intelligence (AI).
Although the number of shares to be listed has not been disclosed, it is expected to be a substantial offering. SoftBank’s valuation of Arm stands at $64 billion, more than double the amount it paid to acquire the company in 2016. This valuation would place Arm in close proximity to the market capitalization of other major companies like electric vehicle manufacturer Rivian at $68 billion and Uber at $75 billion. However, it falls significantly short of the $231 billion valuation for Chinese conglomerate Alibaba when it went public in 2014, which currently stands at a market cap of $1.8 trillion.
Arm holds a dominant position in the design sector for processors in smartphones, with its prospectus claiming that approximately 70 percent of the global population uses its Arm-based products. The company positions itself as the industry leader of CPUs (central processing units), which are integral to these devices.
The timing of the share offering appears to have been thoughtfully chosen by SoftBank, considering the volatility witnessed in the tech stocks throughout 2022, which involved mass layoffs and unsuccessful investments. Susannah Streeter, an analyst at Hargreaves Lansdown, suggests that SoftBank had been waiting for favorable market conditions and, despite recent weaknesses, opted to list Arm sooner rather than later. The smartphone market currently experiences one of the most significant slumps in a decade, and semiconductor companies face declining demand.
In its prospectus, Arm acknowledges being particularly susceptible to economic and political risks that affect China, the world’s largest smartphone market. However, like many companies in the industry, Arm is actively pivoting towards AI as it sees tremendous potential in this emerging technology. Streeter believes that Arm will use AI as its calling card to entice investors.
The shares are expected to go on sale in September. Last year, SoftBank attempted to sell Arm to Nvidia for $40 billion, but the sale fell through due to regulatory concerns regarding competition. Arm, headquartered in Cambridge, England, boasts nearly 6,000 employees and reported $2.7 billion in revenue last year, largely consistent with the previous year.
In conclusion, Arm’s decision to pursue a public stock listing in the US reflects its ambition to cement its status as a leading player in chip designing and AI. With its extensive market share in smartphone processors, Arm’s valuation suggests confidence in its potential growth. The offering is timed carefully, taking into account the challenges faced by the tech industry and the emerging opportunities presented by AI. As Arm prepares to enter the US stock market, its success will be closely watched, and investors will be gauging its potential to capitalize on the future of AI and smartphone technology.
