Arm's IPO path to a US$50 billion market value

The backstory: SoftBank bought Arm, a big chip design company from the UK, for US$32 billion in 2016. But Arm used to be on both the London and New York stock exchanges for almost 18 years before the acquisition.

Arm is in the business of lending out its chip designs to heavyweights like Nvidia, Apple and Amazon, giving them the tools to build their devices. But in 2020, SoftBank tried to sell Arm to Nvidia for US$40 billion. That move set off alarm bells about a possible tech monopoly, and regulators in the US, UK and Europe hit the brakes on the buyout, worried about competition. So, Arm and SoftBank decided to pivot and instead consider going public through an initial public offering (IPO). If that went down, it was said it could be the biggest debut in the tech world since Alibaba in 2014 and Facebook (now Meta) in 2012.

More recently: According to Arm's IPO filing, it’s eyeing some serious numbers for this listing. In 2022, it was looking at a market of US$202.5 billion, and by the end of 2025, it's projected to be US$246.6 billion. This translates to a compound annual growth rate of 6.8%. Plus, Arm estimates it has nearly half (48.9%) of the semiconductor design market share.

The development: Now, Arm wants to raise up to US$4.87 billion in this IPO. This is down from initial goals of between US$8 billion to US$10 billion, but it would still be the world’s biggest IPO this year, even at the bottom of the range. The company is planning to offer 95.5 million American depositary shares for US$47 to US$51 each, according to its recent filing. If things go its way, Arm's overall value could shoot up to somewhere between US$50 to US$54 billion.

Big players like Apple, Google and Nvidia are already on board as cornerstone investors, agreeing to snap up roughly US$735 million worth of Arm's shares. But SoftBank plans to hold onto about 90% of Arm's shares after the sale.

Key comments:

"We are watching closely how the company handles the relationship with its China business – alongside any further impacts from the technology ‘war’ between China and the United States," said Jamie Mills O’Brien, portfolio manager at British fund manager Abrdn.

"Arm is an important element of our ecosystem, our technology and our customers' ecosystem. We want it to be successful, we want it to be healthy. That's the bottom line," said TSMC Chairman Mark Liu on the sidelines of the SEMICON Taiwan summit.

"Arm is proud of its British heritage and continues to work with the British Government," said Arm CEO Rene Haas in March. "We will continue to invest and play a significant role in the British tech ecosystem."