The stock exchange listing will raise less than SoftBank hoped, but it could still be the largest IPO of the year
UK chip designer Arm is set to achieve a valuation of up to $52 billion (£41.4 billion) in its initial public offering (IPO) on the New York Stock Exchange. Despite falling short of SoftBank’s initial expectations, the listing is poised to generate significant fees, estimated at $100 million, for the investment banks involved in the deal. Arm plans to sell 95.5 million shares, priced in the range of $47 to $51 each, potentially raising $4.87 billion for its owner, SoftBank. Following the IPO, SoftBank is expected to retain over 90% of Arm’s shares, implying a valuation between $48 billion and $52 billion.
This marks a significant reduction from the $64 billion valuation SoftBank assigned to Arm in the previous month, when it acquired the remaining 25% from Saudi Arabia’s Vision Fund. Despite the adjusted valuation, Arm’s initial public offering (IPO) has the potential to be the most substantial of the year thus far.
As reported by Bloomberg, the investment banks involved in Arm’s IPO are anticipated to divide 2% of the proceeds obtained by SoftBank, suggesting potential fees of around $100 million. Arm’s updated F-1 filing also discloses interest from several major clients, termed “cornerstone investors,” such as Advanced Micro Devices, Apple, Cadence Design Systems, Google International, Intel, MediaTek, Nvidia, Samsung, Synopsys, and TSMC Partners, who are interested in purchasing Arm shares in the IPO. Arm’s decision to go public in New York, rather than London, is considered a setback for the UK government’s efforts to revive the City post-Brexit, as noted by Victoria Scholar, the head of investment at stockbroker Interactive Investor.
“However, the appeal of New York as a primary listing venue is evident— it provides appealing valuations and substantial trading volumes, resulting in increased liquidity and narrower spreads. These factors are attractive to both traders and investors, as well as public companies,” remarked Victoria Scholar, the head of investment at stockbroker Interactive Investor.
“The FTSE 100 has faced criticism for resembling a ‘Jurassic Park’ stock market index due to a lack of representation from emerging industries like AI, fintech, and renewable energy.”
SoftBank purchased Arm for £24.3bn in July 2016, taking advantage of the pound’s decline in value following the EU referendum, making UK companies more appealing to foreign buyers.
An effort to sell Arm to chip giant Nvidia for $40bn fell through last year due to regulatory obstacles, leading SoftBank to pursue a stock market listing as an alternative.