“SoftBank’s Arm Poised for a $54.5 Billion Valuation in IPO, Pricing to Be Determined Today: Report”
Arm, the chip designer owned by SoftBank Group Corp, has garnered sufficient support from investors to secure a valuation at least at the upper end of its price range in its upcoming initial public offering (IPO). This would result in a valuation of $54.5 billion on a fully diluted basis, according to an individual familiar with the matter.
As reported by Reuters earlier, it was likely that Arm would achieve this outcome. After reviewing investor commitments, Arm has decided to accept the top end of its indicated price range, which was initially set at $47 to $51 per share, or potentially even a higher price.
Arm is now considering pricing its IPO above the indicated range and will make a final decision on the share price on Wednesday. Trading of Arm shares in New York is scheduled to commence on Thursday.
While Arm had contemplated announcing a revised price range to reflect strong investor demand, it ultimately opted for a more conservative approach to marketing the offering. Pricing the IPO in a conservative manner increases the likelihood of strong trading when the shares debut on Thursday.
The sources providing this information requested anonymity due to the confidential nature of the matter. Neither Arm nor SoftBank has immediately responded to requests for comment.
It’s worth noting that the valuation Arm is seeking in its IPO represents a decrease from the $64 billion valuation SoftBank recently acquired when it purchased the remaining 25% stake in the company from its Vision Fund, which it manages. Despite the lower valuation, SoftBank would still fare better than its previous $40 billion deal to sell Arm to Nvidia Corp, which was abandoned last year due to antitrust opposition. SoftBank initially took Arm private in 2016 for $32 billion.
Arm has already secured several major clients, including Apple, Nvidia, Alphabet, Advanced Micro Devices, Intel, and Samsung Electronics, as cornerstone investors in its IPO. The company is striving to convince investors that it has growth potential beyond the dominant mobile phone market, in which it holds a 99% market share.
While Arm’s revenue has experienced stagnation due to weak mobile demand amid a global economic slowdown, the company is emphasizing growth opportunities in areas such as cloud computing and the automotive industry. Arm’s royalty fees, a significant source of revenue, have also been steadily increasing.
Investors have been scrutinizing Arm’s exposure to China, particularly amid geopolitical tensions with the United States and the race to secure chip supplies. Sales in China accounted for 24.5% of Arm’s $2.68 billion in revenue for fiscal 2023.
