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ARM’s IPO Sets Stage for Successful Trading Debut as Chip Designer’s Pricing Strategy Pays Off

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SoftBank Raises $4.87 Billion in Arm IPO, Resisting Temptation for More

Bloomberg reports that SoftBank Group Corp. has successfully raised $4.87 billion in the largest initial public offering (IPO) of the year for Arm Holdings Plc. The IPO was oversubscribed more than 10 times, indicating strong investor interest.

Arm’s IPO Price and Valuation

  • The IPO price for Arm was set in the range of $47 to $51 per share.
  • At the IPO price, Arm is valued at approximately $54.5 billion.

Price-Setting Meeting

During the final price-setting meeting, there was a debate about whether to set the price at $52. However, SoftBank’s founder and CEO, Masayoshi Son, decided on $51 to avoid risking a healthy debut for a small increase in proceeds.

Arm’s Significance in the Technology Industry

Arm is a chip designer whose chips are found in most smartphones globally. The company is expected to benefit from the increasing demand for artificial intelligence chips and generative AI.

Arm’s Background

Arm was established in 1990 as a joint venture and was listed on the London Stock Exchange and Nasdaq until SoftBank acquired it in 2016 for $32 billion.

Failed Sale to Nvidia and IPO Pivot

In 2020, SoftBank attempted to sell Arm to Nvidia for $40 billion but faced opposition from Arm’s customers. As a result, Arm pursued an IPO instead, initially seeking a valuation of $60 billion to $70 billion.

Arm’s IPO Target and Stake Distribution

The IPO target was adjusted to a lower amount due to SoftBank’s decision to buy back a 25% stake held by its Vision Fund. SoftBank also decided to retain a larger portion of Arm’s shares, leaving only 10% for external investors.

Other Tech Companies Awaiting IPOs

Arm’s successful IPO could serve as a catalyst for other tech startups and companies that have been waiting to go public in the US. Some of these companies include Instacart, Klaviyo, VNG Ltd., and Birkenstock Holding Ltd.

Arm’s Listing and Industry Comparison

Arm’s IPO is the largest in the US since Rivian Automotive Inc.’s $13.7 billion offering in October 2021. While it ranks among the tech industry’s largest-ever IPOs, it is still below Alibaba Group Holding Ltd.’s $25 billion offering in 2014 and Facebook Inc.’s $16 billion debut in 2012.

Arm’s Technology and Market Position

Arm’s technology is widely used in smartphones, providing the blueprints and instruction sets for designing microprocessors. The company’s power efficiency has made it a dominant player in the mobile-phone industry.

Chip Industry and Arm’s Financials

The chip industry is experiencing a rally driven by artificial intelligence, but it is still facing challenges due to a sales slump and inventory glut. Arm’s revenue for the fiscal year ended March 31 was $2.68 billion, with net income of $524 million.

Underwriters and Trading Symbol

The IPO is led by Barclays Plc, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Mizuho Financial Group Inc. Raine Securities LLC, backed by SoftBank, is also acting as a financial adviser. Arm’s shares will trade on the Nasdaq Global Select Market under the symbol ARM.

(Updates to add chip index in 17th paragraph.)

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