British microprocessor developer Arm, owned by Japanese conglomerate Softbank, has applied to the US Securities and Exchange Commission (SEC) for a listing on the Nasdaq market in New York. This would be the largest IPO in almost two years, and even bigger depending on the final valuation. Arm, whose microprocessors are ubiquitous in smartphones, is trying to capitalize on the investment rush into stocks linked to artificial intelligence in one way or another.
The SECi-registered placement brochure reveals an internal operation conducted this month in which Softbank bought 25% of Arm from Vision Fund, one of the Japanese conglomerate’s investment vehicles, for $16.1 billion. That would give the Cambridge-based tech company a 100% valuation of around $64.4 billion (€58.2 billion at current exchange rates).
In any case, the preliminary brochure indicates that this price reacts to previous contractual agreements. The company hasn’t even set a benchmark yet, and the placement price will ultimately depend on supply and demand. The price for microchip designers and manufacturers has skyrocketed this year, led by Nvidia.
SoftBank paid $32 billion to acquire Arm in 2016. The Japanese conglomerate began preparing for Arm’s IPO after regulatory pressure thwarted the company’s sale to Nvidia, which it agreed to sell in 2020 for $40 billion. Antitrust authorities in the US and Europe feared that Nvidia would gain undue power in the strategic microprocessor sector, where the company dominates the most advanced chips and artificial intelligence is booming.
However, by March 2022, when the sale of Arm to Nvidia fell through, Softbank had already made it clear that it was determined to sell the microchip giant, valued at more than 50,000 million, “within the fiscal year ending March 31, 2023.” to bring stock The operation has been delayed.
Barclays, Goldman Sachs, JP Morgan and Mizuho are acting as global coordinators of the operation, which has a further 24 banks acting as underwriters and underwriters, including Spain’s Banco Santander, which is a key underwriter through its subsidiary Santander US Capital Markets. Raine Securities is acting as financial advisor.
The company has not yet disclosed what percentage of shares it will list on the market, where it will trade with the code ARM via American Depositary Shares (ADS), certificates representing its shares. Portal published a few months ago that Softbank intended to list 10% on the stock exchange.
Arm’s microprocessor designs are used by major players in the industry to manufacture chips. Intel, AMD, Nvidia and Qualcomm, among others, use British technology designs to develop their products. Arm’s IPO has attracted interest from large tech companies. Nvidia, Intel or giants like Amazon, Apple and Samsung are in talks to buy Arm ahead of its forthcoming IPO, which would help bring some stability to the British tech company’s stocks as it makes its IPO.
Present in almost all smartphones
“Today, ARM CPUs run the majority of the world’s software, including operating systems and applications for smartphones, tablets and PCs, data center and network devices, as well as vehicles and operating systems embedded in devices such as smartwatches, thermostats, etc. Drones and industrial robotics,” says the brochure. The company estimates that “approximately 70% of the world’s population uses Arm-based products.” Thanks to the low power consumption and high performance of the chips it develops, its position in the market for processors that power a smartphone is a virtual monopoly.
The company is moving into segments that are still booming, such as cloud computing and smart cars. For the fiscal year ended March 31, Arm’s revenues declined slightly (from $2.703 billion to $2.679 billion), precisely due to the decline in smartphone sales. Earnings fell 4.5% to $524 million, meaning a $60 billion valuation would only be warranted on strong growth prospects.
At the beginning of the year this is not the case. Revenue for the quarter ended June 30 fell 2.5% to $675 million and profit fell 54% to $105 million.
Electric vehicle maker Rivian celebrated a nearly $70 billion valuation when it made its IPO in November 2021 with the latest major public offering. Shortly thereafter, war broke out in Ukraine, drying up international markets. It has also discouraged companies from doing large corporate deals, which are becoming more difficult to fund as interest rates rise around the world.
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