The British designer of microprocessors Arm, owned by the Japanese conglomerate Softbank, has asked the US Securities and Exchange Commission (SEC) for its listing on the Nasdaq market in New York, in what would be the largest stock market launch in almost two years and, depending on the final valuation, even more. Arm, whose microprocessors are ubiquitous in smartphones, is trying to take advantage of the investment rush for stocks linked one way or another to artificial intelligence.
The placement brochure registered with the SECi reveals an internal operation carried out this month in which Softbank has bought 25% of Arm from Vision Fund, one of the investment vehicles of the Japanese conglomerate, for 16.1 billion dollars. That would give the Cambridge-based tech company a valuation of about $64.4 billion (58.2 billion euros at current exchange rates) for 100%.
In any case, the provisional brochure warns that this price responds to prior contractual agreements. The company has not even set a guideline yet and the placement price will ultimately depend on supply and demand. The price of microchip designers and manufacturers has skyrocketed this year, led by Nvidia.
SoftBank paid $32 billion to take over Arm in 2016. The Japanese conglomerate began preparing Arm’s IPO after pressure from regulators frustrated the company’s sale to Nvidia, which it agreed to in 2020 for $40 billion. Dollars. Antitrust authorities in the United States and Europe feared Nvidia would gain excessive power in the strategic microprocessor sector, where it dominates the most advanced chips, booming for artificial intelligence.
In March 2022, when the sale of Arm to Nvidia failed, Softbank had already made it clear that it was determined to take the microchip giant public with a valuation of more than 50,000 million “within the fiscal year ending March 31, 2023″, although the operation has been delayed.
Barclays, Goldman Sachs, JP Morgan and Mizuho act as global coordinators of the operation, in which another 24 banks act as underwriters and underwriters, including the Spanish Banco Santander, which is one of the main underwriters through its subsidiary Santander US Capital Markets. Raine Securities acts as financial advisor.
The company has not yet communicated what percentage of shares it will bring to the market, where it will be listed under the code ARM through American Depositary Shares (ADS), certificates representing their shares. Reuters published a few months ago that Softbank intended to place 10% on the stock market.
Arm’s microprocessor designs are used by large companies in the sector to produce chips. Intel, AMD, Nvidia or Qualcomm, among others, take advantage of the designs of the British technology to develop their products. Arm’s IPO has attracted interest from big tech companies. Nvidia, Intel or giants like Amazon, Apple and Samsung are negotiating the entry into Arm before its imminent IPO, which would help to give some stability to the titles of the British technology company in its stock market debut.
Present in almost all smartphones
“Today, Arm CPUs run the vast majority of the world’s software, including operating systems and applications for smartphones, tablets and personal computers, data center and network equipment, and vehicles, as well as operating systems embedded in devices such as smartwatches, thermostats, drones, and industrial robotics,” the brochure says. The company estimates that “approximately 70% of the world’s population uses Arm-based products.” Thanks to the low power consumption and the power of the chips it designs, its position in the market for processors that power a smartphone is a practical monopoly.
The company is moving into segments that are still booming, such as cloud computing and smart cars. For the fiscal year ending March 31, Arm’s sales fell slightly (from $2.703 billion to $2.679 billion) precisely because of the drop in smartphone sales. Profit fell 4.5% to $524m, so a valuation above $60bn would only be justified with strong growth prospects.
At the start of the year, this is not the case. Sales have fallen by 2.5%, to 675 million dollars, in the quarter closed on June 30 and profit has been reduced by 54%, to 105 million dollars.
The manufacturer of electric vehicles Rivian starred in its stock market debut in November 2021 valued at nearly 70,000 million dollars with the last great public sale offer. Shortly after, the war in Ukraine broke out, drying up international markets. It also discouraged companies from undertaking large corporate operations, which are more difficult to finance with rising interest rates around the world.
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