The British Chip Developer Arm Intends To Raise up to $4.87 Billion Through an IPO

The British chip developer, Arm, which is owned by the Japanese company SoftBank Group, plans to offer its American Depositary Shares (ADS) in an IPO on the Nasdaq stock exchange in the US at a price range of $47 to $51 per share. 

This information comes from Bloomberg, citing the US Securities and Exchange Commission (SEC).

Taking into account the share price, SoftBank could raise up to $4.87 billion through this IPO, and Arm's market capitalization could reach around $52.33 billion. Underwriters also have the option to purchase up to 7 million additional shares.

While Arm initially aimed to raise between $8 to $10 billion, this target was reduced at least in part because SoftBank decided to acquire 25% of the shares held by its Vision Fund and retain a larger portion of the company's shares, as reported by the publication.

Anchor investors, including Apple Inc., Nvidia Corp., Intel Corp., TSMC, and Google, which is part of Alphabet Inc., have expressed plans to purchase ADS worth up to $735 million, according to Arm.

Following the IPO, SoftBank will still control approximately 90% of Arm's shares, as mentioned in the documents. Arm plans to change its name to Arm Holdings Plc before trading on the Nasdaq Global Select Market under the abbreviation ARM.

A successful debut for Arm will bring unexpected profits to SoftBank's founder, Masayoshi Son, whose Vision Fund lost a record $30 billion last year.

Although Arm's technology is used in nearly every smartphone, it is not widely recognized by consumers. Arm sells the designs necessary for developing microprocessors and licenses the technology known as instruction sets, which define how software interacts with these chips. The energy efficiency of Arm's technology has made it ubiquitous in phones, where battery life is critical.

Rene Haas, who took over as CEO of Arm last year, is now working on expanding beyond the smartphone market into more advanced computing, particularly in chips for data centers and artificial intelligence applications. To keep pace with advancements in artificial intelligence, companies will need suitable chips to run complex software. Arm says that every processor it designs will accelerate AI and machine learning technology, which it supports. Its processors are already working with these technologies, and the company has started adding new features to make algorithms run faster.

Processors for this market are among the most expensive and profitable in the industry. In the 12 months ending March 31, Arm earned a net income of $524 million on revenue of $2.7 billion. Net income decreased by 5%, while revenue decreased by 1%. The company receives approximately a quarter of its revenue from China.

SoftBank Group acquired Arm in 2016 for $32 billion. Later, it was reported that SoftBank attempted to sell Arm to Nvidia in a $40 billion deal, which would have been the largest chip industry acquisition. However, this purchase faced resistance from regulators and Arm's own customers, and Nvidia abandoned the deal last year. Subsequently, SoftBank embarked on the path to realize its IPO plan.