The IPOX® Watch - IPO Pre-Launch Analysis: Arm Holdings (ARM US)
COMPANY DESCRIPTION
Headquartered in Cambridge, U.K., Arm was founded in 1990 as Advanced RISC Machines Ltd. through a collaboration between Acorn Computers, Apple, and VLSI Technology. The company specializes in designing and licensing microprocessors, graphics units, and other related tech components and software. The chip architecture designed by Arm is distinctively different from designs most commonly used in modern PC and laptops (i.e. "x86 Architecture" used by firms such as Intel/AMD) and lends itself for mobile applications, prioritizing energy efficiency over performance.
BUSINESS MODEL
As a "fabless" semiconductor firm, Arm doesn't manufacture chips themselves. Instead, they license their technology to other companies. Arm specializes in Reduced Instruction Set Computing (RISC) semiconductors. Their power-efficient designs have made Arm the preferred choice for the vast majority of smartphones, tablets, and an expanding array of IoT devices. Major companies like Apple, Amazon, Qualcomm, and Samsung license Arm's designs to power their devices, underlining Arm's critical role in the modern computing landscape. Arm's revenue sources include intellectual property licensing, royalties, software and development systems sales, professional services such as training and design consultation, as well as support and maintenance services.
IPO HISTORY AND ACQUISITION BY SOFTBANK
On 04/17/1998, Arm began trading on the London Stock Exchange and the Nasdaq National Market led by Morgan Stanley Dean Witter. The British semiconductor company offered 11,730,000 shares (3.910,000 ADSs) at £5.75 per share (or $29.17 per ADS), valuing the firm at £264 million based on the offering price (around $400m). In 2016, The chip designer was taken private by SoftBank Group for ca. £24 billion (or $31 billion) in cash, a +42.98% premium.
2023 IPO RELAUNCH
In 2020, SoftBank attempted to sell Arm to Nvidia for roughly $40 billion. However, the deal attracted significant scrutiny from global antitrust regulators, leading to its collapse in early 2022. Subsequently, SoftBank weighed the option of relisting Arm in London or pursuing a dual listing, as done before. Yet, the IPO plan was put on hold, and Arm decided on a sole U.S. listing in 2023. Overseen by Barclays and backed by 26 other underwriters, Arm released 95.5 million shares at $51 each, the peak of its projected price range ($47 - $51). This pegs the company's value at an estimated $52.33 billion at the time of the offer. Trading for Arm is slated to commence on September 14, 2023 (Thursday).
SoftBank Group is expected to beneficially own approximately 90% following the completion of this offering. AMD, Apple, Cadence Design Systems, Google, Intel, MediaTek, NVIDIA, Samsung, Synopsys, and TSMC (collectively referred to as the “Cornerstone Investors”) have, separately indicated an interest in purchasing up to an aggregate of $735 million of the ADSs offered in this offering.
As the selling shareholder. SoftBank will receive all net proceeds from the sale, while Arm will not receive any proceeds.
