ARM Holdings Secures $54.5 Billion Valuation in U.S. IPO
New York (Reuters) – Chip designer Arm Holdings Plc has achieved a valuation of $54.5 billion in its initial public offering (IPO) in the United States, marking a significant increase from the $32 billion price tag when it was taken private by SoftBank Group Corp seven years ago.
This IPO represents a step back from the previous $64 billion valuation Arm received when SoftBank acquired the remaining 25% stake from its $100 billion Vision Fund. Despite the lower valuation, SoftBank still fares better than its failed $40 billion deal to sell Arm to Nvidia Corp, which was canceled due to antitrust concerns.
Arm priced its IPO at $51 per share, the highest in its indicated range, and raised $4.87 billion for SoftBank through the sale of 95.5 million shares. The company’s shares are set to begin trading in New York on Thursday.
Notably, Arm has already secured major clients as cornerstone investors for its IPO, including Apple, Nvidia, Alphabet, Advanced Micro Devices, Intel, and Samsung Electronics.
Earlier reports indicated that Arm had received sufficient backing from investors, securing the top end of the price range between $47 and $51 per share. The company has been working to convince investors of its growth potential beyond the dominant mobile phone market, focusing on expanding its presence in the cloud computing and automotive sectors.
Arm’s revenue has been affected by weak mobile demand amid a global economic slowdown. However, the company highlighted its opportunity for growth in the cloud computing market, which is expected to grow at an annual rate of 17% through 2025, thanks to advancements in artificial intelligence. Arm also expects the automotive market, where it commands a 41% share, to expand by 16%.
The company also assured investors of the accumulation of royalty fees, which make up a significant portion of its revenue. Arm’s royalty revenue reached $1.68 billion in the latest fiscal year, compared to $1.56 billion the previous year.
One area of investor concern has been Arm’s exposure to China amid geopolitical tensions with the United States. Sales in China contributed 24.5% of Arm’s $2.68 billion revenue in fiscal 2023.
Reporting by Echo Wang and Anirban Sen in New York; Editing by Sandra Maler, Greg Roumeliotis, and Richard Chang.