SoftBank Group Corp.’s subsidiary, Arm Holdings Ltd., is poised to embark on what could be the most significant initial public offering (IPO) of the year, as the once-obscure phone chip designer aims to capitalize on the burgeoning realm of artificial intelligence (AI) computing. The move, which comes after much anticipation, promises a potential windfall for SoftBank’s founder, Masayoshi Son, and carries the potential to galvanize the IPO ambitions of other companies.
In a regulatory filing made public on Monday, Arm disclosed that the IPO initiative will be spearheaded by financial giants Barclays Plc, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Mizuho Financial Group Inc. Notably absent from the list of underwriters is Morgan Stanley, a detail that has raised eyebrows in financial circles.
The projected IPO timeline is ambitious, with Arm planning to commence its roadshow during the first week of September and finalize the pricing the subsequent week, according to sources cited by Bloomberg. While the exact terms of the share sale remain undisclosed, market analysts expect Arm to target a valuation in the range of $60 billion to $70 billion.
This IPO is poised to have far-reaching implications. Should Arm manage a successful debut, it will signify a major triumph for Masayoshi Son, whose Vision Fund suffered a staggering loss of $30 billion in the previous year. Furthermore, it could ignite IPO enthusiasm among several companies, including Instacart Inc., Klaviyo, and Birkenstock, either prompting them to expedite their IPO plans or to reconsider their strategies.
Amid the backdrop of this IPO fervor, the stage is set for Arm’s potential reinvention. Having been known primarily for its involvement in smartphone technology, Arm is now under the leadership of CEO Rene Haas, who is steering the company toward expanding its footprint in advanced computing segments such as data centers and AI applications. With processors for these markets being among the most lucrative and expensive in the industry, Arm’s strategic shift is underpinned by a quest for sustained growth.
While Arm’s technology has been instrumental in nearly every smartphone, its role often goes unnoticed by consumers. The company provides the essential blueprints for microprocessor designs and licenses instruction sets that govern software-chip communication. Notably, Arm’s energy-efficient technology has made it an industry staple in mobile devices.
A successful IPO for Arm would not only serve as a triumph for SoftBank but also reinforce its AI-focused strategy, showcasing that the market’s appetite for AI is unwavering, as stated by PitchBook analyst Kyle Stanford.
Despite an industry-wide slump exacerbated by inventory surpluses and a challenging smartphone market, Arm’s determination to embrace new horizons is visible. The IPO’s projected valuation reflects the company’s confidence in riding the wave of AI chips and generative AI. Amazon’s adoption of Arm-based chips for its Amazon Web Services attests to the efficiency of this technology.
The IPO landscape hasn’t witnessed such a significant boost in nearly two years. Arm’s offering could emerge as the largest in the US since Rivian Automotive Inc.’s $13.7 billion IPO in October 2021, potentially rivaling industry giants like Alibaba Group Holding Ltd. and Meta Platforms Inc.
As the IPO saga unfolds, regulatory hurdles and geopolitical tensions loom over Arm’s aspirations, with the company highlighting export restrictions from the US and UK as potential impediments to its operations in China.
Arm is poised for transformation, set to adopt the name “Arm Holdings Plc” as it debuts on the Nasdaq Global Select Market under the symbol ARM. The filing confirms that the IPO’s lead banks—Barclays, Goldman Sachs, JPMorgan Chase, and Mizuho—will collaborate as joint book-running managers. However, it’s noteworthy that these banks are poised to equally share fees, breaking from conventional practice.
In terms of its workforce and intellectual property, Arm boasts a substantial engineering foundation with around 80% of its global employees engaged in research, design, and innovation. The company holds thousands of patents and has cultivated enduring relationships with its top customers, some spanning over two decades.
The global AI frenzy has underscored the need for cutting-edge chips to power complex software. Arm is embracing this demand, promising that its processors will accelerate AI and machine learning technologies. Collaborations with industry leaders like Alphabet, Cruise, Mercedes-Benz, Meta, and Nvidia signal Arm’s commitment to delivering AI-driven solutions across sectors.
Arm’s journey to this pivotal IPO moment was marked by its founding in 1990 as a joint venture between Acorn Computers, Apple, and VLSI Technology. Previously listed on the London Stock Exchange and Nasdaq, the company was acquired by SoftBank for $32 billion in 2016.
The IPO initiative follows SoftBank’s attempt to sell Arm to Nvidia for $40 billion—an effort stymied by regulatory and customer opposition. In the wake of this setback, SoftBank pivoted towards the IPO route to drive Arm’s future trajectory.
Source: Bloomberg
