SoftBank’s Arm aims for over $52b valuation in biggest US IPO in 2023

SoftBank Group’s Arm is seeking a valuation of more than $52 billion in its initial public offering, the chip designer said on Tuesday as it begins marketing for the biggest US stock market flotation of the year.

SoftBank is offering 95.5 million American depository shares of the United Kingdom-based company for $47 to $51 apiece and is looking to raise up to $4.87 billion at the top of the range, Arm said in a regulatory filing.

The valuation that Arm is chasing now represents a climb-down from the $64 billion valuation at which SoftBank last month acquired the 25% stake it did not already own in the company from its $100 billion Vision Fund.

Yet even with this more modest valuation ask, SoftBank would fare better than its $40 billion deal to sell Arm to Nvidia Corp , which it abandoned last year amid opposition from antitrust regulators.

Jamie Mills O’Brien, portfolio manager at British fund manager Abrdn, said he found SoftBank’s valuation ask in the IPO “more palatable than initially discussed.”

“We are watching closely how the company handles the relationship with its China business - alongside any further impacts from the technology ‘war’ between China and the United States,” he said.

The Japanese conglomerate will own 90.6% of Arm’s ordinary shares after the offering closes, the company said, adding that it will not receive any proceeds from the IPO.

Arm has signed up many of its major clients as investors in its IPO, including Apple, Nvidia, Alphabet , Advanced Micro Devices, Intel and Samsung Electronics.

The company said the ‘cornerstone investors’ have separately indicated an interest in buying a combined $735 million of the ADS being sold.

Arm’s listing, the biggest in New York since Rivian in late 2021, is expected to buoy the IPO market globally and fuel other startups toward going public as its success would signal the return of investor appetite for technology companies.

It will also be a milestone for SoftBank, as it taps several marquee technology names as investors to drum up support for the company whose designs power more than 99% of the world’s smartphones.

Reuters first reported on SoftBank’s proposed price range for the IPO on Saturday. Sources also said it could possibly raise this range before the IPO prices, should investor demand prove strong.

Arm, whose client list includes the world’s biggest tech giants, generates a big share of its revenue through royalty fees based on either the average selling price of the customer’s Arm-based chip or a fixed fee per chip.

For the year ended March 31, Arm’s sales fell to $2.68 billion, hurt mainly by a slump in global smartphone shipments.

Unlike most loss-making but high-growth tech companies that debut with lofty valuations but later plummet below list price, Arm is profitable. This is expected to significantly reduce investor anxieties, analysts have said.