Sept 5 (Reuters) – SoftBank Group’s (9984.T) 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 U.S. 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 (NVDA.O), 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 (AAPL.O), Nvidia (NVDA.O), Alphabet (GOOGL.O), Advanced Micro Devices (AMD.O), Intel (INTC.O) and Samsung Electronics (005930.KS).
The company said the ‘cornerstone investors’ have separately indicated an interest in buying a combined $735 million of the ADS being sold.
RETURN TO THE PUBLIC MARKETS
Arm’s listing, the biggest in New York since Rivian (RIVN.O) 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.
Sara Russo, senior analyst at Bernstein, said it is early days for Arm to benefit from the boom in artificial intelligence but the space represents an area of potential growth for Arm.
Analysts have said Arm can potentially ride on Nvidia’s coattails, which has been the biggest beneficiary of the AI boom with the stock surging more than 230% year-to-date, as its chips must be coupled with energy-efficient central processing units (CPUs) – Arm’s specialty.
Arm was founded in 1990, as a joint venture between Acorn Computers, Apple Computer, and VLSI Technology.
Its shares traded on the London Stock Exchange and the Nasdaq from 1998 until 2016, when it was taken private by SoftBank in a deal that valued it at $32 billion.
Barclays (BARC.L), Goldman Sachs (GS.N), JPMorgan Chase (JPM.N), and Mizuho Financial Group (8411.T) are the lead underwriters for the offering.
If the underwriters exercise their right to buy shares in Arm in full as part of ‘greenshoe option’, it would take the IPO amount to be raised to $5.2 billion.
Arm, which has tapped a total of 28 banks for the IPO, has not picked a traditional “lead left” bank and will split underwriter fees evenly among the top four banks.
Arm expects to trade on the Nasdaq Global Select Market under the symbol “ARM”.
Reporting by Manya Saini in Bengaluru
Additional reporting by Pablo Mayo Cerqueiro in London
Editing by Arun Koyyur and Nick Zieminski
: .