SoftBank targets over $50 billion valuation for its ARM’s IPO

Late last month, we wrote about Arm Holdings Ltd. after the SoftBank-owned chip designer reportedly filed its paperwork for an initial public offering with the Securities and Exchange Commission (SEC) for a listing on the Nasdaq exchange. Now, we have more updates on this highly-anticipated blockbuster IPO.

Reuters reported over the weekend that Arm intends to present potential investors with a pricing range of $47 to $51 per share as it commences the marketing phase of its upcoming initial public offering (IPO) next week, citing sources familiar with the matter,

The recently disclosed price range, previously undisclosed, implies a valuation for Arm in the ballpark of $50 billion to $54 billion, with the IPO offering ranging from $5 billion to $5.4 billion, Reuters reported. The valuation projection, if realized, would position Arm as the most valuable company to debut in New York since the 2021 entry of electric vehicle manufacturer Rivian Automotive.

Sources, requesting anonymity due to the confidential nature of the matter, have suggested that SoftBank might consider raising this range ahead of the IPO’s pricing if investor demand demonstrates significant strength. Arm declined not to comment on the story, while SoftBank had not responded to requests for comment at the time of reporting.

Renowned for its integral role in creating chip designs present in nearly all smartphones across the globe, Arm holds a significant position within the tech industry. Amidst the chip industry’s downturn, the UK-based chip maker has demonstrated resilience, outperforming many peers and expanding into thriving sectors like cloud computing. With the increase in demand for AI chips, the company is trying to recover from challenges within the tech market and shift its focus towards the realm of artificial intelligence.

In the fiscal year concluding on March 31, Arm’s sales contracted to $2.68 billion, primarily due to a decline in global smartphone shipments. According to an earnings release from SoftBank, Arm’s sales dropped 2.5% to $675 million (88.5 billion Japanese yen)

The firm also added that over 50% of its royalty revenue during the most recent fiscal year was generated from smartphones and consumer electronics. However, the global smartphone market is predicted to reach its lowest point in a decade this year, as indicated by Counterpoint Research.

Arm’s chip designs play a crucial role in the production of chips for major semiconductor companies worldwide, including Intel, AMD, Nvidia, and Qualcomm. However, the impact of an IPO investment on Arm’s existing commercial relationships with these companies remains uncertain.

Earlier this year, Arm turned down a proposal from the British government to list its shares on the London Stock Exchange and opted to pursue a flotation on a U.S. exchange instead.

In 2016, SoftBank acquired Arm for $32 billion, marking the largest-ever purchase of a European technology company up to that point. SoftBank’s strategic move was driven by the aim to establish a presence within the burgeoning Internet of Things (IoT) sector. Although IoT represents only a fraction of Arm’s overall business, during that time, it held significant attention in the tech world.

Arm’s influence extends beyond just wearables and smart home devices; the company has diversified its semiconductors into various applications, including the realm of connected cars.

Founded in 1990, Arm was originally initiated as a collaborative effort involving Acorn Computers, Apple (then known as Apple Computer), and VLSI Technology. The company made its debut on both the London Stock Exchange and Nasdaq in 1998. However, in 2016, SoftBank acquired Arm, taking it private in a deal valued at $32 billion.