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The backstory: Arm is a tech company that SoftBank bought for around US$32 billion in 2016. It’s a big player in the world of mobile processing, designing the technology that makes smartphones work. Companies like Nvidia, Apple and Amazon license this tech to design processors for their products.
In 2020, SoftBank wanted to sell Arm to Nvidia for US$40 billion. It seemed like a strategic move within the semiconductor scene. But some competitors were worried about Nvidia having too much control in the sector. And last year, the merger got stuck because regulators in the US, the UK and Europe had antitrust concerns. So instead, SoftBank started thinking about taking Arm public through an initial public offering (IPO). If it goes public, estimates say it could be the biggest tech IPO since Alibaba in 2014 and Facebook (now Meta) in 2012.
The development: Amazon is reportedly talking to a bunch of other tech companies about becoming a cornerstone investor for Arm's upcoming IPO, which is expected in September. According to insiders who are close to the matter, Amazon wants to be part of a deal that could raise as much as US$10 billion.
Other big players like Intel, Alphabet (Google's parent company) and Nvidia are also in conversations with Arm about joining as backers for the IPO. Now, these potential backers won't have a say in decisions or get seats on Arm's board. But sources say Arm is counting on them to strengthen relationships with top clients and make the IPO even more appealing.
"It had the rare hallmarks of a SoftBank investment turning to gold, but instead Arm will head back for listing in financial markets where tech stocks have been seriously tarnished of late," said Hargreaves Lansdown analyst Susannah Streeter in February.
“Arm has powered the smartphone revolution around the world. Going forward, we believe that Arm products are going to power auto, cloud, metaverse, IOT – a variety of areas. And that’s how it’s been evolving,” said SoftBank founder Masayoshi Son last year. “Arm is embarking on a second growth stage.”
“If the Arm IPO happens at a decent valuation, then I don’t think it’s negative,” said Sharon Chen, credit analyst at Bloomberg Intelligence in May. “But if the company ramps up investments prior to the Arm IPO, that’s likely to be negative because this could weaken LTV.”