Arm Sees Big Tech Interest Ahead of its Highly Anticipated IPO

The Arm Imperative

Arm is a British chip designer founded in 1990 and considered the crown jewel of the UK tech sector. It is owned by Japanese multinational holding company SoftBank, which took it private in 2016 for around $US31 billion. [1]

Although it does not make chips itself, Arm licenses its architecture to other companies, which are used in a wide range of products and services, like cars, cloud computing, Artificial Intelligence (AI) and consumer electronics. It is indispensable to the smartphone market, as nearly all of the world's smartphones run on Arm-based processors, including Android devices and iPhones.

In fact, the company disclosed this week that it has signed a new "long-term agreement" with Apple that extends beyond 2040, which continues the tech giant's access to the Arm architecture. [2]

Canceled Acquisition by Nvdia

Nvidia dominates the news this year, since it is at the forefront of the Artificial Intelligence (AI) revolution and reaps the benefits. It reported blockbuster quarterly results in August, with record revenues, driven by increased demand for its AI infrastructure. Its stock more than tripled during the first eight months of the year, helping the broader rally of the technology sector.

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It is clear that Nvidia and its CEO Jensen Huang are able to identify critical parts of the industry and do leading work on those fields. In a prior manifestation of this ability, the tech giant had agreed to acquire Arm three years ago for $40 billion [3], in a deal that could reshape the smartphone industry.

This was not meant to be though, as Nvidia abandoned the deal in February 2022, following regulatory hurdles. [4]

Arm IPO

The termination announcement said that Softbank would explore a public offering for its UK-based asset and the time for that has now come. In August, Arm applied for a listing on the Nasdaq, under the symbol "ARM", in what is one of the most anticipated IPOs in years. [5]

According to an updated filing with the US Securities and Exchanges Commission (SEC) this week, the chip designer set a price range of $47.00-$51.00/share for 95,500,000 shares (with an option for extra 7 million shares by the underwriters). [2]

SoftBank will own approximately 90.6% of the shares after the completion of the offering leaving less than 10% to be freely traded on the Nasdaq.

Big Tech Interest

Although no exact date has been set yet, it is reasonable to expect Arm to begin trading publicly within 2023. This shapes up to be the biggest IPO of the year and could provide another boost to the US tech sector, although success is not guaranteed.

In one of the biggest IPOs in US history, EV startup Rivian Automotive listed for $78/share in 2021 [6]. After the initial jump during the first few days, the stock fell substantially and had a poor run since. It closed last month below $23.

In an encouraging sign, Arm disclosed interest from many tech behemoths in this week's filing [2], which does not constitute binding agreements or commitments though. Nvidia, AMD, Apple, Intel and Samsung were just some of the firms that indicated an interest in buying "up to an aggregate of $735 million" of shares at the initial offering price.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 06 Sep 2023 https://www.businesswire.com/news/home/20160717005081/en/SoftBank-Offers-to-Acquire-ARM-Holdings-for-GBP-24.3-Billion-USD-31.4-Billion-in-Cash

2

Retrieved 06 Sep 2023 https://www.sec.gov/Archives/edgar/data/1973239/000119312523228059/d393891df1a.htm

3

Retrieved 06 Sep 2023 https://nvidianews.nvidia.com/news/nvidia-to-acquire-arm-for-40-billion-creating-worlds-premier-computing-company-for-the-age-of-ai

4

Retrieved 06 Sep 2023 https://nvidianews.nvidia.com/news/nvidia-and-softbank-group-announce-termination-of-nvidias-acquisition-of-arm-limited

5

Retrieved 06 Sep 2023 https://www.arm.com/company/news/2023/08/arm-announces-public-filing-of-registration-statement-for-proposed-initial-public-offering

6

Retrieved 02 Mar 2024 https://rivian.com/newsroom/article/rivian-announces-pricing-of-upsized-initial-public-offering

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