April 21, 2024

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Arm Aims for $50 Billion Valuation in Landmark IPO Listing

Arm, the British chip designer, is embarking on its first public share sale since 2016, with aspirations to attain a market valuation exceeding $50 billion (£40 billion). Specifying in chip design for a variety of gadgets, from smartphones to gaming consoles, Arm is eyeing a substantial capital infusion of nearly $5 billion in its U.S. listing.

This initial public offering (IPO) stands out as one of the most significant of the year, signifying a litmus test for market sentiment. Notably, this decision follows considerable lobbying efforts by the UK government to have the IPO conducted in London, spearheaded by Prime Minister Rishi Sunak’s direct involvement in negotiations. However, the final decision favoured the Nasdaq.

Arm’s CEO, Rene Haas, has pledged to retain its critical intellectual property, corporate headquarters, and operations within the UK. Arm, regarded as a stalwart of the British tech industry, estimates that roughly 70% of the global population uses products reliant on its semiconductor designs, including a substantial portion of the world’s smartphones.

Owned by Japanese investment heavyweight Softbank since 2016, in a deal that valued Arm at $32 billion, the company has an extensive history of being listed on both the London and New York stock exchanges for 18 years. Post the forthcoming share sale, Softbank will continue to hold a 90% stake in Arm, albeit a smaller portion than initially envisioned.

In a recent regulatory filing, Arm revealed plans to offer 95,500,000 shares in the IPO at an expected price range of $47 to $51 per share, which would peg its market worth between approximately $50 billion and $54 billion. Prominent technology titans like Apple, Google, and Nvidia have already pledged to invest around $735 million in the company.

This strategic move by Softbank to reduce its holdings in Arm serves as an alternative to the previously explored but ultimately abandoned $40 billion sale to Nvidia due to regulatory competition concerns in 2022.

Given the prevailing geopolitical tensions surrounding semiconductors in the U.S.-China tech rivalry, this IPO is being closely monitored. Arm’s sales rely heavily on China, constituting about 25% of the company’s revenue, and have recently faced challenges due to a slowdown in smartphone shipments. Despite these challenges, Arm endeavours to forge ahead into the future of semiconductor technology.