SoftBank-backed Arm prices IPO at top of range in year’s biggest listing

NEW YORK - Arm Holdings priced its initial public offering (IPO) at the top end of its range to

raise US$4.87 billion (S$6.6 billion) in the largest listing of 2023,

one that could give a major lift to long-suffering equity markets.

The chip designer, which is owned by SoftBank Group, sold 95.5 million American depositary shares for US$51 apiece, according to a statement on Wednesday confirming an earlier Bloomberg News report.

Arm had marketed the shares for US$47 to US$51 each.

At the IPO price, Arm is valued at about US$54.5 billion, according to Bloomberg News calculations.

Underwriters have the option of buying as many as seven million additional shares.

While Arm had previously aimed to raise US$8 billion to US$10 billion, that target was lowered at least in part because SoftBank decided to buy the roughly 25 per cent stake held by its Vision Fund and then hold onto a larger portion of the shares in the company.

After the IPO, SoftBank will still control about 90 per cent of the company’s shares, Arm said in its filings with the United States Securities and Exchange Commission.

Arm was setting aside more than US$700 million of the stock in the IPO to be bought by some of its biggest customers, including Intel, Apple, Nvidia, Samsung Electronics and Taiwan Semiconductor Manufacturing Co.

The shares are expected to begin trading on Thursday on the Nasdaq Global Select Market under the symbol ARM.

IPO drought

Arm’s IPO surpasses the May US$4.37 billion listing by Johnson & Johnson consumer health spin-off Kenvue.

The IPO could also be a catalyst for IPOs from dozens of tech start-ups and other companies whose plans to go public in the US have been stuck during the deepest, longest listing trough since the financial crisis in 2009.

Online grocery delivery company Instacart, marketing and data automation provider Klaviyo, Vietnam-based Internet start-up VNG and footwear maker Birkenstock Holding have all filed to go public.

SoftBank, which acquired Arm seven years ago for US$32 billion, has helped grow the chip designer and change its business model.

Arm – which is a key part of the chip supply chain, designing semiconductors found in most of the world’s smartphones – earlier had sought to be valued at US$60 billion to US$70 billion in the IPO.

SoftBank’s Vision Fund transaction

valued Arm at more than US$64 billion, based on Arm’s filings.

A successful debut by Arm would provide a windfall for SoftBank founder Masayoshi Son, whose Vision Fund lost a record US$30 billion in 2022.

Arm’s target valuation reflects a belief that it will benefit from the stampede towards artificial intelligence chips and generative AI – an industry shift that has helped give Nvidia a market value of more than US$1.1 trillion.

Ubiquitous chips

Though Arm’s technology is used in almost every smartphone, it is not well known among consumers.

Arm sells the blueprints needed to design microprocessors, and licenses technology known as instruction sets that dictate how software programs communicate with those chips.

The power efficiency of Arm’s technology helped make it ubiquitous on phones, where battery life is critical.

Mr Rene Haas, who took over as Arm’s chief executive in 2022, is working to expand beyond the smartphone market, which has stagnated in recent years.

He is setting his sights on more advanced computing, particularly the chips for data centres and AI applications.

Processors for that market are among the most expensive – and profitable – in the industry.

To keep pace with AI developments, companies will need the right chips to run complex software.

Arm says that every processor it designs will accelerate the AI and machine learning technology it helps power.

Its processors already run those technologies, and the company has started adding new functionality to make the algorithms work faster. bloomberg