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SoftBank-Backed Arm Raises $4.87 Billion in Biggest 2023 IPO

SoftBank-Backed Arm Raises $4.87 Billion in Biggest 2023 IPO

(Bloomberg) -- Arm Holdings Plc priced its initial public offering at the top end of its range to raise $4.87 billion in the largest listing of the year, one that could give a major lift to long-suffering equity markets.

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The chip designer, which is owned by SoftBank Group Corp., sold 95.5 million American depositary shares for $51 apiece, according to a statement Wednesday confirming an earlier Bloomberg News report. Arm had marketed the shares for $47 to $51 each.

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At the IPO price, Arm is valued at about $54.5 billion, according to Bloomberg News calculations. Underwriters have the option of buying as many as 7 million additional shares.

While Arm had previously aimed to raise $8 billion to $10 billion, that target was lowered at least in part because SoftBank decided to buy the roughly 25% stake held by its Vision Fund and then hold onto a larger portion of the shares in the company. After the IPO, SoftBank will still control about 90% of the company’s shares, Arm said in its filings with the US Securities and Exchange Commission.

Arm was setting aside more than $700 million of the stock in the IPO to be bought by some of its biggest customers, including Intel Corp., Apple Inc., Nvidia Corp., Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co.

The offering is being led by Barclays Plc, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Mizuho Financial Group Inc. Raine Securities LLC is also acting as financial adviser in connection with the IPO.

The shares are expected to begin trading Thursday on the Nasdaq Global Select Market under the symbol ARM.

IPO Drought

The IPO is the world’s biggest this year, surpassing the $4.37 billion listing by Johnson & Johnson consumer health spinoff Kenvue Inc. Arm’s IPO could also be a catalyst for IPOs from dozens of tech startups and other companies whose plans to go public in the US have been stuck during the deepest, longest listing trough since the financial crisis in 2009.

Online grocery-delivery firm Instacart Inc., marketing and data automation provider Klaviyo, Vietnam-based internet startup VNG Ltd. and footwear maker Birkenstock Holding Ltd. have all filed to go public.

SoftBank, which acquired Arm seven years ago for $32 billion, has helped grow the chip designer and change its business model.

Arm — which is a key part of the chip supply chain, designing semiconductors found in most of the world’s smartphones — earlier had sought to be valued at $60 billion to $70 billion in the IPO. SoftBank’s Vision Fund transaction valued Arm at more than $64 billion, based on Arm’s filings.

A successful debut by Arm would provide a windfall for SoftBank founder Masayoshi Son, whose Vision Fund lost a record $30 billion last year.

Arm’s target valuation reflects a belief that it will benefit from the stampede toward artificial intelligence chips and generative AI — an industry shift that has helped give Nvidia a market value of more than $1.1 trillion.

EXPLAINER: All About Arm, The Biggest IPO of 2023: QuickTake

Ubiquitous Chips

Though Arm’s technology is used in almost every smartphone, it isn’t well-known among consumers. Arm sells the blueprints needed to design microprocessors, and licenses technology known as instruction sets that dictate how software programs communicate with those chips. The power efficiency of Arm’s technology helped make it ubiquitous on phones, where battery life is critical.

Rene Haas, who took over as Arm’s chief executive officer last year, is working to expand beyond the smartphone market, which has stagnated in recent years. He’s setting his sights on more advanced computing, particularly the chips for data centers and AI applications. Processors for that market are among the most expensive — and profitable — in the industry.

To keep pace with AI developments, companies will need the right chips to run complex software. Arm says that every processor it designs will accelerate the AI and machine learning technology it helps power. Its processors already run those technologies, and the company has started adding new functionality to make the algorithms work faster.

Inventory Glut

The overall chip industry is still contending with a sales slump, worsened by a glut of inventory.

Arm’s revenue fell about 1% to $2.68 billion for the fiscal year ended March 31, according to its filings. The company’s net income, which jumped to $549 million in fiscal year 2022 from $388 million the previous year, fell this year to $524 million.

Founded in 1990 as a joint venture between Acorn Computers, Apple and VLSI Technology, Arm is returning to the public market. It was listed on the London Stock Exchange and Nasdaq from 1998 until 2016, when SoftBank acquired the business for $32 billion.

SoftBank previously attempted to sell Arm to Nvidia in a $40 billion deal, which would have been the largest chip industry takeover. But the purchase faced opposition from regulators and Arm’s own customers, and Nvidia walked away from it last year. SoftBank then embarked on its plan for the IPO.

Arm’s listing is the largest in the US since electric-vehicle maker Rivian Automotive Inc.’s $13.7 billion offering in October 2021. The IPO is also set to rank among the tech industry’s largest-ever, though still well below the two biggest: Alibaba Group Holding Ltd.’s $25 billion 2014 offering and 2012’s $16 billion debut by Meta Platforms Inc., then known as Facebook Inc.

(Updates with statement in second paragraph)

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