On Monday, Arm Holdings Ltd., the British chip designer backed by Japan’s SoftBank Group (OTCMKTS:SFTBY), filed for an initial public offering (IPO). Arm’s public debut is anticipated to be the biggest IPO of 2023 and bring some life to the IPO market, which has seen several companies delay or cancel their public listing plans due to higher interest rates and macro pressures. Arm expects to list on the Nasdaq and trade under the ticker “ARM.”
More on Arm’s IPO
Arm filed confidentially for a public listing in the U.S. earlier this year. While the latest share sale document did not reveal any terms, the company is estimated to seek a valuation of between $60 billion and $70 billion.
In August, Softbank acquired the 25% remaining stake in Arm that was held by its Saudi-backed Vision Fund unit for $16.1 billion. That deal indicated Arm’s valuation at around $64 billion. While Arm was earlier planning to raise $8 billion to $10 billion from the IPO, it is now expected to seek lesser capital following SoftBank’s purchase of the remaining stake.
Arm designs, develops, and licenses high-performance and energy-efficient central processing unit (CPU) products and related technology, on which several leading semiconductor companies and original equipment manufacturers depend to develop their products. Arm generally charges an upfront licensing fee for its technology and then receives a royalty payment on each chip sold by its customers.
As per Arm’s IPO filing with the U.S. Securities and Exchange Commission (SEC), over 260 companies reported that they had shipped Arm-based chips in the fiscal year ended March 31, 2023, including tech behemoths Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL, GOOG) and major semiconductor companies Advanced Micro Devices (NASDAQ:AMD), Intel (NASDAQ:INTC), NVIDIA (NASDAQ:NVDA), and Qualcomm (NASDAQ:QCOM).
It is worth noting that Softbank has approached some of Arm’s biggest clients, including Amazon and Nvidia, to back its IPO. Barclays Plc (NYSE:BCS), Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), and Mizuho Financial Group are the lead underwriters for the offering.
In the June quarter, Arm’s revenue declined 2.5% year-over-year to $675 million, while EPS dropped to $0.10 from $0.22 in the prior-year quarter. The company’s results reflected a slowdown in global smartphone shipments. Nevertheless, Arm is expected to have solid long-term growth potential, given the demand induced by artificial intelligence.
Is Softbank a Good Investment?
The upcoming IPO could make Softbank a worthwhile investment. Reuters previously reported that Softbank plans to sell nearly 10% of Arm’s shares in the IPO. Softbank will remain the controlling shareholder of Arm after it begins trading on the Nasdaq. SFTBY shares have risen over 7% year-to-date.
