Arm Secures $54.5 Billion Valuation in Year's Biggest IPO With Apple, Nvidia, Samsung as Investors

Chip designer Arm Holdings secured a $54.5 billion (roughly Rs. 4,52,121 crore) valuation in its US initial public offering (IPO) on Wednesday, seven years after its owner SoftBank Group took the company private for $32 billion (nearly Rs. 2,66,170 crore). The IPO represents a climb-down from the $64 billion (roughly Rs. 5,30,899 crore) valuation at which SoftBank last month acquired the 25 percent stake it did not already own in the company from the $100 billion (roughly Rs. 8,29,530 crore) Vision Fund it manages.

Yet even with this lower valuation, SoftBank fares better than its $40 billion (roughly Rs. 3,31,800 crore) deal to sell Arm to Nvidia, which it abandoned last year amid opposition from antitrust regulators. Arm priced its IPO at $51 (roughly Rs. 4,230) per share, at the top of its indicated range, raising $4.87 billion (roughly Rs. 40,398 crore) for SoftBank based on 95.5 million shares sold, the company said on Wednesday. Reuters first reported on Arm's decision on the pricing.

Arm's shares are scheduled to start trading in New York on Thursday.

Arm has already signed up many of its major clients as cornerstone investors in its IPO, including Apple, Nvidia, Alphabet, Advanced Micro Devices, Intel, and Samsung Electronics.

Reuters was first to report on Tuesday that Arm received enough backing from investors to secure at least the top end of the price range between $47 (roughly Rs. 3,898) and $51 (roughly Rs. 4,230) per share in its initial public offering (IPO), including the possibility of the share sale being priced above range.

Arm launched its IPO marketing efforts last week, seeking to convince investors it has growth ahead of it, beyond the mobile phone market, which it dominates with a 99 percent share.

Weak mobile demand during a global economic slowdown has caused Arm's revenue to stagnate. Overall sales totaled $2.68 billion (roughly Rs. 22,237 crore) in the 12 months to the end of March, compared to $2.7 billion (roughly Rs. 22,402 crore) in the prior period.

Arm told potential investors in New York last Thursday that the cloud computing market, of which it has only a 10 percent share and therefore more room to expand, is expected to grow at an annual rate of 17 percent through 2025, partly thanks to advances in artificial intelligence. The automotive market, of which it commands 41 percent, is forecast to expand by 16 percent, compared with just 6 percent growth expected for the mobile market.

Arm also told investors its royalty fees, which account for most of its revenue, have been accumulating since it started collecting them in the early 1990s. Royalty revenue came in at $1.68 billion (roughly Rs. 13,940 crore) in the latest fiscal year, up from $1.56 billion (roughly Rs. 12,945 crore) a year before. 

An area of scrutiny for investors has been Arm's exposure to China, given geopolitical tensions with the United States that have led to a race to secure chip supplies. Sales in China contributed 24.5 percent of Arm's $2.68 billion (roughly Rs. 2,22,340 crore) revenue in fiscal 2023. 

© Thomson Reuters 2023