The Surprising Journey of Arm: How it Garnered Support for its IPO Despite Valuation Challenges

Arm's IPO Seeks Valuation Support Despite Pricing Challenges

Arm, the chip design company owned by SoftBank Group, has set the price for its planned US listing below market expectations, even as it receives interest from major tech companies and customers, fueling anticipation for its long-awaited IPO.

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In its filing with the US Securities and Exchange Commission, Arm aims for a valuation of up to £52 billion, intending to offer 95.5 million ordinary shares at a price range of £47 to £51 per share.

If the IPO reaches the higher end of the price range, SoftBank could raise approximately £4.9 billion, significantly lower than the previous target of at least £8 billion.

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According to Richard Windsor, the founder of industry blog Radio Free Mobile, the pricing indicates potential obstacles in the deal's execution.

Windsor believes the IPO will provide the market with an opportunity to evaluate Arm as either an AI company or a semiconductor IP company. He argues that identifying Arm as the latter could result in a more moderate valuation, which may be favorable for the company's long-term prospects, regardless of SoftBank's desired numbers on its balance sheet.

Windsor emphasizes that the success of the IPO roadshow will rely on convincing investors that an AI-like valuation is justified.

Arm and SoftBank Group have recently commenced the IPO roadshow.

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The IPO is highly anticipated and comes at a challenging time for the IPO market, which has been sluggish for the past couple of years, as noted by Windsor.

CNN Business reported that Arm has indicated interest from companies such as Apple, Google, Nvidia, Samsung, Intel, AMD, and Taiwan Semiconductor Manufacturing Company, which are considering purchasing up to £735 million in Arm's shares upon its listing on Nasdaq.

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Bloomberg, based on Arm's previous filing, projected a market capitalization between £60 billion and £70 billion.