Arm files for IPO on Nasdaq

'Largest IPO of the year' hoves into view

Chip designer Arm, owned by SoftBank Group Corp, has unveiled the paperwork for an upcoming initial public offering (IPO) that is expected to be the largest of the year.

On Monday, the firm submitted its application [pdf] to be listed on the Nasdaq stock exchange using the ticker symbol "ARM."

The move comes five months after Arm revealed that it had submitted confidential and preliminary IPO documents to regulatory authorities in the United States.

Currently, Arm has not yet disclosed the quantity of company shares to be offered for sale or their respective prices, as these specifics will be established at a later time.

In a separate development, SoftBank on Friday repurchased the remaining 25% ownership stake of Arm that was previously held by its Vision Fund unit. The deal was completed at a valuation of $64 billion for Arm.

SoftBank reportedly is targeting an IPO valuation between $60 billion and $70 billion. This valuation significantly surpasses Nvidia's 2020 $40 billion offer which was blocked by regulators, and greatly exceeds the initial acquisition cost of Arm by SoftBank.

On Monday, SoftBank officially confirmed the deal with its Vision Fund in the filed documentation.

According to the submitted documents, for its fiscal year ending in March 2023, Arm reported a net income of $524 million generated from $2.68 billion in revenue. The performance marked a slight decrease in revenue compared to the previous fiscal year's sales of $2.7 billion.

Arm's filing also provides insight into its reliance on the Chinese market, which accounts for nearly a quarter of its total revenues. The IPO comes at a time when the Biden administration is restricting the dealings of US semiconductor companies within China. Notably, Arm's engagement in the Chinese market is facilitated through a local entity that neither Arm nor SoftBank have direct control over.

Analysts expect Arm's upcoming IPO to be the largest of the year, although opinions differ as to the valuation that SoftBank places on the company.

In a recent assessment, Bernstein analysts suggested a fair-market valuation for Arm of approximately $40 billion. This estimation was grounded in a preliminary analysis of the financial data that had been made available up to that point.

Arm's road to going public

Following the collapse of the Nvidia deal due to objections from antitrust regulators in the US and Europe, SoftBank initiated the groundwork for Arm's IPO.

Arm holds a position of paramount significance within the chip industry. It specialises in licensing an instruction set that forms the core of practically every mobile chip, and this influence has extended to encompass PC and server chips as well.

In recent times, Arm has directed its efforts towards marketing comprehensive chip designs, a pursuit that carries higher profitability.

In its filing, the company asserted that around 70% of the global population utilises products based on Arm's technology. It highlighted that chips incorporating its technology secured a 49% stake in a total addressable market valued at slightly over $200 billion in the previous year.

At the start of this month, it was reported SoftBank was engaged in discussions with various technology firms, such as Amazon and Nvidia, which are contemplating potential investments in Arm's upcoming IPO.

Analysts say Arm aims to fortify its relationship with key clients and enhance the attractiveness of its IPO by enlisting cornerstone investors, a move intended to bolster its standing.