On 21 August 2023, British multinational semiconductor and software design company Arm filed for an initial public offering (IPO). The company officially went public on 14 September and is listed on the Nasdaq.

Background

Arm is a British multinational semiconductor and software design company founded in 1990 as a joint venture between Acorn Computers, Apple, and VLSI Technology. In 1998, Arm began trading on the London Stock Exchange and was a component of the FTSE 100 Index. The company was also listed on the Nasdaq as an American depositary receipt.[1] In 2016, Japanese multinational conglomerate SoftBank Group acquired Arm for US$32 billion, taking the company private. American multinational technology company Nvidia attempted to acquire Arm for US$40 billion in September 2020 but abandoned the bid in February 2022 facing regulatory scrutiny and setbacks. Since Nvidia's failed acquisition, SoftBank has incurred losses; in the first quarter of 2023, SoftBank posted a US$3.3 billion loss.[2]

Initial public offering

Preparations

SoftBank Group CEO Masayoshi Son led the proposed initial public offering of Arm

Hours after Nvidia's proposed acquisition of Arm fell through on 7 February 2022, SoftBank Group CEO Masayoshi Son pitched an initial public offering in spite of a downturn in technology stocks as a result of Federal Reserve restrictions and Chinese regulations affecting companies in SoftBank's portfolio such as Alibaba Group. According to Son, SoftBank would complete the initial public offering within its fiscal year and would likely be listed on the technology-focused Nasdaq for Arm's clientele, much of whom are based in Silicon Valley.[3] The proposed initial public offering signalled that SoftBank would accept a valuation below the US$32 billion it paid for Arm in 2016;[4] early projections from analysts suggested a valuation between US$25 to US$35 billion, less lucrative for SoftBank as the Nvidia deal.[5] Several days afterwards, details emerged of a lawsuit filed by Arm China CEO Allen Wu who sought autonomy over the company, affecting the potential initial public offering. Due to the dispute, Arm could not initially confirm Arm China's revenues.[6] Wu stated his intention to pursue a separate initial public offering in 2025 in an interview with the South China Morning Post.[7] In April 2022, Arm China's board unanimously voted to remove Wu.[8]

On 16 February 2022, Bloomberg News reported that SoftBank was seeking a US$8 billion margin loan—a tactic used heavily by Son—with an external valuation upwards of US$50 billion.[9] On 24 March, Bloomberg reported that SoftBank was officially seeking a valuation of US$60 billion appointed Goldman Sachs, JPMorgan Chase, and Mizuho Financial Group to lead a loan transaction worth as much as US$10 billion.[10][11] Reuters followed up Bloomberg's reporting by stating that Goldman Sachs would lead the transaction altogether.[12] Goldman Sachs was originally hired by SoftBank in 2020 to determine possible options for Arm, including an initial public offering, leading to Nvidia's proposed acquisition.[13] South Korean memory semiconductor supplier SK Hynix expressed interest in acquiring Arm that month in an interview with The Korea Herald, but reserved that it was a "theoretical review" to the South China Morning Post.[14] By 4 April, eight other lenders became involved, including Barclays, Banco Santander, BNP Paribas, and Crédit Agricole.[15] SoftBank would retain its controlling stake in the company after the initial public offering.[16]

In June 2022, Qualcomm CEO Cristiano Amon told the Financial Times that Qualcomm was considering buying a stake in Arm.[17] Then-British prime minister Boris Johnson attempted to convince SoftBank executives to list Arm in the United Kingdom beginning in May;[18] the following month, SoftBank considered listing arm on the London Stock Exchange in addition to the Nasdaq. The secondary listing would prevent Arm from being relisted on the FTSE 100 Index, of which Arm was the index's largest technology company until SoftBank's acquisition.[19] The British government internally debated using the National Security and Investment Act 2021 to pressure Arm to move its initial public offering to London. Arm's refusal to move back created a domestic political issue.[20] The London Stock Exchange has also lobbied for Arm to be listed on its exchange.[21] By June, the dispute with Wu was resolved.[22] Amid a government crisis in July that resulted in the resignation of dozens of government officials, including Johnson, SoftBank halted its work on an initial public offering.[23]

Arm delayed its initial public offering indefinitely in November 2022 citing global market turmoil, telling The Register that the company is "fully committed" to going public in 2023.[24] In December, British prime minister Rishi Sunak met with Haas at 10 Downing Street, reviving talks with SoftBank.[25] British efforts have focused on a dual primary listing, benefiting London's post-Brexit economy and liquidity in Arm's shares. PrimaryBid estimated £3 billion in demand from ordinary investors and proposed a retail offer.[26] By March, Arm decided against a listing in the United Kingdom but reserved that a secondary listing could occur at a later date.[27] Valued at US$30 to US$70 billion,[28] SoftBank aimed to raise US$8 billion that month, led by Goldman Sachs, JPMorgan Chase, Barclays, and Mizuho Financial Group.[29]

Filing and roadshow

On 29 April 2023, Arm confidentially submitted a draft registration statement to the Securities and Exchange Commission (SEC), officially registering for an initial public offering.[30] The filing rose SoftBank Group shares.[31] On 21 August, Arm filed for an initial public offering, notably excluding Morgan Stanley among the involved banks.[32] At a potential debut of US$10 billion, the initial public offering would be the year's largest and the technology sector's third largest, behind Facebook's initial public offering in 2012 for US$16 billion and Alibaba Groups's initial public offering in 2014 for US$25 billion. In preparation for the filing, SoftBank purchased SoftBank Vision Fund's quarter stake in Arm for US$16.1 billion, valuing the company at US$64.4 billion,[33] though SoftBank targeted a valuation of US$52 billion, selling one-tenth of the shares outstanding between US$47 and US$51.[34] Arm began its roadshow on 3 September.[35] On 13 September, The Wall Street Journal reported that Arm would begin trading the following day at US$51 a share, valuing the company at US$54.5 billion; The Wall Street Journal previously reported that the company would initially trade at US$52 at a valuation of US$55.5 billion.[36]

Public trading

Trading began on 14 September. On the first day of trading, Arm shares rose to US$61.[37] By the following week, shares of the company fell for the fourth session on September 20 valuing at $52.24, roughly two percent above the $51 IPO price.[38] On September 21, the stock fell below the IPO price.[39]

Aftermath

The New York Times's Erin Griffith compared Arm to Punxsutawney Phil, a groundhog in Punxsutawney, Pennsylvania known for predicting the forthcoming season. According to Griffith, the strong first day of trading bodes well for the Instacart and Klaviyo's presumptive initial public offerings.[40]

References

  1. ↑ Saini, Manya; Wang, Echo; Sen, Anirban (5 September 2023). "SoftBank's Arm launches IPO courting T Rowe in $52 billion valuation ask". Reuters. Retrieved 8 September 2023.
  2. ↑ Nerkar, Santul; Clark, Don (21 August 2023). "Arm, the Chip Designer, Files for an I.P.O. Expected to Be Among the Largest". The New York Times. Retrieved 8 September 2023.
  3. ↑ Fujikawa, Megumi; Landers, Peters (9 February 2022). "SoftBank Pitches IPO for Arm After Deal With Nvidia Falls Through". The Wall Street Journal. Retrieved 8 September 2023.
  4. ↑ Kwok, Karen; Thal Larsen, Peter (8 February 2022). "Arm IPO marks sober end to SoftBank chip party". Reuters. Retrieved 8 September 2023.
  5. ↑ King, Ian; Savov, Vlad (9 February 2022). "Arm's IPO Won't Be as Lucrative for SoftBank as Nvidia Deal". Bloomberg News. Retrieved 8 September 2023.
  6. ↑ Gross, Anna; Bradshaw, Tim; McMorrow, Ryan (10 February 2022). "SoftBank's plans for Arm IPO hit by legal battle over renegade China unit". Financial Times. Retrieved 8 September 2023.
  7. ↑ "Arm China CEO Allen Wu says IPO likely after 2025". Reuters. 28 February 2022. Retrieved 8 September 2023.
  8. ↑ Ye, Josh (4 May 2022). "Arm China says its ousted CEO Wu is refusing to pack up". Reuters. Retrieved 8 September 2023.
  9. ↑ Tan, Gillian; David, Ruth (16 February 2022). "SoftBank Seeks $8 Billion Margin Loan as Part of Arm IPO". Bloomberg News. Retrieved 8 September 2023.
  10. ↑ King, Ian; Tse, Crystal; Baker, Liana (24 March 2022). "SoftBank Is Seeking at Least $60 Billion in Arm IPO". Bloomberg News. Retrieved 8 September 2023.
  11. ↑ Massoudi, Arash; Gross, Anna; Slodkowski, Antoni; Kruppa, Miles (25 March 2022). "SoftBank finalising loans of up to $10bn from banks before Arm IPO". Financial Times. Retrieved 8 September 2023.
  12. ↑ Sen, Anirban; Hu, Krystal; Nussey, Sam (24 March 2022). "Goldman Sachs poised to lead U.S. IPO of SoftBank's Arm". Reuters. Retrieved 8 September 2023.
  13. ↑ Robinson, Dan (25 March 2022). "Goldman Sachs reportedly set to head up $60bn Arm IPO". The Register. Retrieved 8 September 2023.
  14. ↑ Pan, Che (31 March 2022). "Semiconductor giants' interest to acquire British chip design firm Arm deepens as owner SoftBank steps up IPO plans". South China Morning Post. Retrieved 8 September 2023.
  15. ↑ Poh, Jacqueline; Jeong Lee, Min (4 April 2022). "SoftBank Group Lines Up 11 Lenders for Arm's $8 Billion Loan". Bloomberg News. Retrieved 8 September 2023.
  16. ↑ King, Ian (22 April 2022). "SoftBank plans to retain controlling stake in Arm after IPO". The Japan Times. Retrieved 8 September 2023.
  17. ↑ Gross, Anna; Bradshaw, Tim (30 May 2022). "Qualcomm wants to buy a stake in Arm alongside its rivals". Financial Times. Retrieved 8 September 2023.
  18. ↑ Thomas, Daniel; Parker, George (2 May 2022). "Boris Johnson joins last-ditch bid to win Arm listing for London". Financial Times. Retrieved 8 September 2023.
  19. ↑ King, Ian; Turner, Giles (14 June 2022). "SoftBank Plans Additional London Listing for Arm IPO". Bloomberg News. Retrieved 8 September 2023.
  20. ↑ Slodkowski, Antoni; Gross, Anna; Thomas, Daniel; Pickard, Jim; Massoudi, Arash (21 June 2022). "UK officials weigh national security grounds to force London IPO for Arm". Financial Times. Retrieved 8 September 2023.
  21. ↑ Shaw, William; Mackenzie, Tom (21 July 2022). "LSE in 'Fight' for Arm to List in London, Says CEO Hoggett". Bloomberg News. Retrieved 8 September 2023.
  22. ↑ Gross, Anna (27 June 2022). "Arm signals push for deals and more staff with IPO proceeds". Financial Times. Retrieved 8 September 2023.
  23. ↑ Gross, Anna; Thomas, Daniel; Pickard, Jim (18 July 2022). "SoftBank halts work on Arm's London IPO following political turmoil". Financial Times. Retrieved 8 September 2023.
  24. ↑ Robinson, Dan (21 November 2022). "Arm confirms IPO delay till later in 2023, blames global markets". The Register. Retrieved 8 September 2023.
  25. ↑ Gross, Anna; Thomas, Daniel (8 January 2023). "Rishi Sunak revives talks with SoftBank on London listing for Arm". Financial Times. Retrieved 8 September 2023.
  26. ↑ Griffiths, Katherine; Gopinath, Swetha; Seal, Thomas (23 January 2023). "UK Public Could Participate in Arm Listing Through Retail Offer". Bloomberg News. Retrieved 8 September 2023.
  27. ↑ David, Ruth; Thomson, Amy (1 March 2023). "SoftBank-Backed Arm Rules Out UK Listing for Now to Focus on US IPO". Bloomberg News. Retrieved 8 September 2023.
  28. ↑ Jeong Lee, Min; Gopinath, Swetha (2 March 2023). "Bankers Pitch Arm IPO at $30 Billion to $70 Billion Valuation". Bloomberg News. Retrieved 8 September 2023.
  29. ↑ Wang, Echo; Sen, Anirban (6 March 2023). "SoftBank's Arm aims to raise at least $8 billion in U.S. IPO, sources say". Reuters. Retrieved 8 September 2023.
  30. ↑ Barton, Susanne (29 April 2023). "Softbank's Arm Says It Registered Confidentially for US IPO". Bloomberg News. Retrieved 8 September 2023.
  31. ↑ Hyuga, Takahiko (30 April 2023). "SoftBank Shares Rise After Arm Files Confidentially for IPO". Bloomberg News. Retrieved 8 September 2023.
  32. ↑ Hytha, Michael (21 August 2023). "Morgan Stanley Is One of the Only Big Banks Left Off Arm's IPO". Bloomberg News. Retrieved 8 September 2023.
  33. ↑ King, Ian; Hytha, Michael (21 August 2023). "SoftBank's Arm Files for IPO That Is Set to Be 2023's Biggest". Bloomberg News. Retrieved 8 September 2023.
  34. ↑ Dummett, Ben (5 September 2023). "Arm Targets More Than $52 Billion Valuation in Largest IPO of the Year". The Wall Street Journal. Retrieved 8 September 2023.
  35. ↑ Jeong Lee, Min; Seal, Thomas (3 September 2023). "Arm IPO Expectations Tempered as Roadshow Kicks Off". Bloomberg News. Retrieved 8 September 2023.
  36. ↑ Driebusch, Corrie; Dummett, Ben; Fitch, Asa (13 September 2023). "Arm Set to Price IPO at $52 a Share". The Wall Street Journal. Retrieved 13 September 2023.
  37. ↑ Driebusch, Corrie; Fitch, Asa (14 September 2023). "Arm Shares Rise as Trading Begins in Biggest IPO of the Year". The Wall Street Journal. Retrieved 14 September 2023.
  38. ↑ "Arm Holdings shares extend declines, down fourth session in a row". Reuters. 20 September 2023. Retrieved 22 September 2023.
  39. ↑ "Arm dips below IPO price as short sellers circle". Reuters. 21 September 2023. Retrieved 22 September 2023.
  40. ↑ "Arm Rises More Than 10% in the Year's Biggest Initial Public Offering". 14 September 2023.
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