SoftBank-owned chip firm Arm lowers valuation and fundraising target

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SoftBank-owned chip firm Arm is adjusting its expectations for its upcoming public listing, with a lower valuation and fundraising target. The chip designer, whose customers include major players like Apple, Nvidia, Intel, and Samsung Electronics, now plans to raise between $5 billion to $7 billion, down from its previous goal of up to $10 billion. The valuation is also expected to range from $50 billion to $60 billion, as opposed to the initial target of $60 billion to $70 billion.

These adjustments come as Arm faces challenges such as revenue erosion and a higher exposure to China than anticipated. The company’s recent prospectus revealed that its revenue declined about 1% to $2.68 billion in the last fiscal year. Additionally, Arm’s Chinese operations, primarily conducted through its independent unit Arm China, are its largest customer, accounting for almost a quarter of sales.

Industry analysts have suggested that a valuation of $50 billion to $60 billion is more realistic for Arm’s public listing. This projection would represent a setback for SoftBank founder Masayoshi Son, as the company had acquired a 25% stake in Arm from its Vision Fund for $16.1 billion, valuing Arm at approximately $64 billion.

The ongoing roadshow leading up to the listing on the Nasdaq next week may still impact the final numbers. However, a weaker-than-expected debut could negatively affect SoftBank’s credit outlook, according to Bloomberg Intelligence analyst Sharon Chen. She notes that raising $5 billion to $7 billion may not be enough to offset the impact of SoftBank’s purchase of the Vision Fund’s stake in Arm. As a result, SoftBank’s adjusted loan-to-value ratio could weaken, while its leverage might not meet the requirements for a Ba3 rating by Moody’s.

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Chen also highlights that a listing at a lower value may raise questions about the implied $64 billion valuation of the transaction between SoftBank and the Vision Fund.

As Arm prepares for its public debut, it must address investor concerns regarding China risks, the slowing growth of the smartphone market, and the potential earnings boost from advancing artificial intelligence adoption. The final outcome of Arm’s listing will depend on how investors evaluate these factors and the overall performance of the company.

In summary, SoftBank-owned chip firm Arm is scaling back its valuation and fundraising target for its upcoming public listing. The company now aims to raise $5 billion to $7 billion, and the valuation is projected to be between $50 billion and $60 billion. Challenges such as revenue erosion and a significant exposure to China have contributed to these adjustments. The success of Arm’s listing will depend on investor perceptions of China risks, smartphone market growth, and the impact of artificial intelligence adoption on the company’s earnings potential.

Frequently Asked Questions (FAQs) Related to the Above News

Why is Arm adjusting its valuation and fundraising target for its public listing?

Arm is making these adjustments due to challenges such as revenue erosion and a higher exposure to China than anticipated. These factors have led the company to revise its expectations and lower its fundraising target and valuation range.

How much does Arm now plan to raise in its public listing?

Arm now plans to raise between $5 billion to $7 billion, down from its previous goal of up to $10 billion.

What is the revised valuation range for Arm's upcoming public listing?

The valuation range for Arm's public listing is expected to be between $50 billion to $60 billion, as opposed to the initial target of $60 billion to $70 billion.

Who are some of Arm's major customers?

Arm's major customers include Apple, Nvidia, Intel, and Samsung Electronics.

What challenges is Arm currently facing?

Arm is facing challenges such as revenue erosion and a higher exposure to China than anticipated. These factors have influenced the company's decision to adjust its valuation and fundraising target.

How did Arm's revenue perform in the last fiscal year?

Arm's revenue declined about 1% to $2.68 billion in the last fiscal year, according to its recent prospectus.

What impact could a weaker-than-expected debut have on SoftBank's credit outlook?

A weaker-than-expected debut could negatively affect SoftBank's credit outlook, potentially weakening its adjusted loan-to-value ratio and jeopardizing its leverage requirements for a Ba3 rating by Moody's.

What stake in Arm did SoftBank acquire from its Vision Fund, and at what value?

SoftBank acquired a 25% stake in Arm from its Vision Fund for $16.1 billion, valuing Arm at approximately $64 billion.

What could a lower listing value raise questions about?

A listing at a lower value may raise questions about the implied $64 billion valuation of the transaction between SoftBank and the Vision Fund.

What concerns does Arm need to address before its public debut?

Arm needs to address investor concerns regarding China risks, the slowing growth of the smartphone market, and the potential earnings boost from advancing artificial intelligence adoption.

What will determine the final outcome of Arm's public listing?

The final outcome of Arm's listing will depend on how investors evaluate factors such as China risks, smartphone market growth, and the potential impact of artificial intelligence adoption on the company's earnings potential.

Please note that the FAQs provided on this page are based on the news article published. While we strive to provide accurate and up-to-date information, it is always recommended to consult relevant authorities or professionals before making any decisions or taking action based on the FAQs or the news article.

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