SoftBank’s Arm Seeks to Raise Up to $4.87 Billion in Anticipated IPO

SoftBank Group Corp.’s Arm Holdings Ltd. is planning to raise as much as $4.87 billion in the chip designer’s long-anticipated initial public offering, marking lowered ambitions for an IPO that was once expected to generate roughly twice that amount.

(Bloomberg) — SoftBank Group Corp.’s Arm Holdings Ltd. is planning to raise as much as $4.87 billion in the chip designer’s long-anticipated initial public offering, marking lowered ambitions for an IPO that was once expected to generate roughly twice that amount.  

Arm will offer 95.5 million American depositary shares for $47 to $51 each, the company said in a filing Tuesday with the US Securities and Exchange Commission. The deal will value Arm at as much as $54.5 billion at the top end of the range, according to Bloomberg News calculations. Underwriters have the option of buying as many as 7 million additional shares.

While Arm had previously aimed to raise $8 billion to $10 billion, that target was lowered at least in part because SoftBank decided to buy the 25% 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% of Arm’s shares, it said in the filing. 

Even at the bottom of the share-sale range, the IPO would still be the world’s biggest this year, surpassing the $4.37 billion listing by Johnson & Johnson consumer health spinoff Kenvue Inc. Arm’s listing could also be a catalyst for IPOs from dozens of tech startups 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 firm Instacart Inc., marketing and data automation provider Klaviyo, Vietnam-based internet startup VNG Ltd. and footwear maker Birkenstock are among those that have either already filed for or are pursuing IPOs. 

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 $60 billion to $70 billion in the IPO. SoftBank’s Vision Fund transaction valued Arm at more than $64 billion, based on Arm’s filings. 

The company could still raise more or less money depending on investor demand on its roadshow. The company is considering pricing its shares on Sept. 13 and the stock will start trading the next day.

Read More: Arm Banks Set for $100 Million Payday From Chip Designer’s IPO

Ten of Arm’s customers — including Apple Inc., Nvidia Corp., Advanced Micro Devices Inc., Alphabet Inc.’s Google, Intel Corp., MediaTek Inc, TSMC Partners Ltd., Synopsys Inc. and Cadence Design Systems Inc. — have agreed to be cornerstone investors in the offering, expressing interest in buying as much as $735 million of the shares. Taiwan Semiconductor Manufacturing Co. Chairman Mark Liu told reporters in Taipei the chipmaker was still deliberating an investment and would make a final decision this week.

Arm also has extended a long-term agreement with Apple so that the pact lasts beyond 2040, according to the filing. The move will continue “our longstanding relationship of collaboration with Apple and Apple’s access to the Arm architecture,” the chip designer said.

The agreement represents a commitment to Arm by one of the biggest technology companies at a time when other customers are showing interest in a rival standard. Qualcomm Inc., NXP Semiconductors NV and other chipmakers have been developing a technology called RISC-V that could reduce the industry’s reliance on Arm.

Arm’s offering is being led by Barclays Plc, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Mizuho Financial Group Inc., with 24 other underwriters below that top tier. Arm plans to change its name to “Arm Holdings Plc” before it begins trading on the Nasdaq Global Select Market under the symbol ARM.

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

Arm’s target valuation reflects a belief that it will benefit from the stampede toward artificial intelligence chips and generative AI — an industry shift that has helped give Nvidia a $1.2 trillion valuation.

Though Arm’s technology is used in almost every smartphone, it isn’t 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.

Rene Haas, who took over as Arm’s chief executive officer last year, is working to expand beyond the smartphone market, which has stagnated in recent years. He’s setting his sights on more advanced computing, particularly the chips for data centers 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.

The overall chip industry is still contending with a sales slump, worsened by a glut of inventory. 

Arm’s revenue fell about 1% to $2.68 billion for the fiscal year ended March 31, according to its filings. The company’s net income, which jumped to $549 million in fiscal year 2022 from $388 million the previous year, fell this year to $524 million.

Read More: All About Arm and Why It’s The Biggest IPO of 2023

Founded in 1990 as a joint venture between Acorn Computers, Apple and VLSI Technology, Arm is returning to the public market. It was listed on the London Stock Exchange and Nasdaq from 1998 until 2016, when SoftBank acquired the business for $32 billion.

SoftBank previously attempted to sell Arm to Nvidia in a $40 billion deal, which would have been the largest chip industry takeover. But the purchase faced opposition from regulators and Arm’s own customers, and Nvidia walked away from it last year. SoftBank then embarked on its plan for the IPO.

Arm’s listing is poised to be the largest in the US since electric-vehicle maker Rivian Automotive Inc.’s $13.7 billion offering in October 2021. The IPO is also set to rank among the tech industry’s largest-ever, though still well below the two biggest: Alibaba Group Holding Ltd.’s $25 billion 2014 offering and 2012’s $16 billion debut by Meta, then known as Facebook Inc.

–With assistance from Bailey Lipschultz and Debby Wu.

(Updates with TSMC chairman’s comment in the eighth paragraph)

More stories like this are available on bloomberg.com

©2023 Bloomberg L.P.