Sep. 5 (Reuters) – SoftBank Group subsidiary Arm Holdings Ltd (9984.T) launched a roadshow for its blockbuster initial public offering (IPO) on Tuesday as the chip designer tries to convince investors it’s valued at up to $52 billion in the biggest public offering of the year. . sell shares.
Arm kicked off its roadshow in Baltimore, home to the influential asset manager T Rowe Price, underlining the fund manager’s importance in large IPOs.
T Rowe Price was a lead investor in some of the largest stock market debuts, including electric car maker Rivian Automotive Inc (RIVN.O), which fetched $66.5 billion in an initial public offering in 2021. The IPO is Arm’s initial year is the largest since then.
Arm also met with other potential investors on Tuesday, including Arlington, Virginia-based Sands Capital, according to sources who asked not to be identified to discuss private meetings.
SoftBank is offering 95.5 million American depository shares in Cambridge, England-based Arm for $47 to $51 a share and is looking to raise as much as $4.87 billion at the top of the range.
Arm revealed that the proposed range would be valued at between $48 billion and $52 billion. It also revealed that it may issue some shares as compensation to its employees, which would raise its valuation, on a fully diluted basis, to $54.5 billion.
The valuation Arm is chasing represents a downgrade from the $64 billion valuation at which SoftBank last month acquired the 25% stake it did not already own in the company from the $100 billion Vision Fund.
But even with that more modest valuation request, SoftBank would do better than its $40bn deal to sell Arm to Nvidia Corp (NVDA.O), which it abandoned last year amid opposition from antitrust regulators.
Jimmy Mills O’Brien, portfolio manager at British fund manager Aberdeen, said he found SoftBank’s IPO valuation request “more plausible than what was initially discussed”.
“We’re watching closely how the company handles the relationship with its business in China — along with any other impacts from the technology ‘war’ between China and the US,” he said.
The company said the Japanese group will own 90.6% of Arm’s common shares after the offering closes, adding that it will not receive any proceeds from the IPO.
Arm has many of its major clients listed as anchor investors in the IPO, including Apple (AAPL.O), Nvidia (NVDA.O), Alphabet (GOOGL.O), Advanced Micro Devices (AMD.O), Intel ( INTC).O) and Samsung Electronics (005930.KS).
Arm said investors showed interest in purchasing a total of $735 million in shares sold in the offering.
Back to the public markets
Arm was founded in 1990 as a joint venture between Acorn Computers, Apple Computer and VLSI Technology.
Its shares traded on the London Stock Exchange and Nasdaq from 1998 until 2016, when it was acquired by SoftBank in a deal valued at $32 billion.
Arm’s listing is expected to boost the IPO market globally and motivate other startups to go public as its success will signal a return of investor appetite for technology companies.
Several other big names, including grocery delivery service Instacart Inc, marketing automation platform Klaviyo and shoe brand Birkenstock, are expected to list on US stock exchanges in the coming weeks.
It will also be a landmark for SoftBank, as it taps several high-profile technology names as investors to drum up support for the company whose designs power more than 99% of the world’s smartphones.
Reuters first reported on SoftBank’s proposed price range for the IPO on Saturday. The sources also said they may raise this range ahead of IPO prices, if investor demand proves strong.
Arm generates a large share of its revenue through equity fees based on the average selling price of an Arm-based customer segment or a flat fee per segment.
For the year ending March 31, Arm’s sales fell to $2.68 billion, mainly affected by lower global smartphone shipments.
Unlike most loss-making but high-growth tech companies that debut at high valuations but later drop below their list price, Arm is profitable. Analysts said this is expected to significantly reduce investor concerns.
Sarah Russo, a senior analyst at Bernstein, said it was early for Arm to capitalize on the boom in artificial intelligence, but space represented a potential growth area for Arm.
Analysts said Arm could catch up with Nvidia, which has been the biggest beneficiary of the AI boom with its shares up more than 230% year-to-date, as its chips should be paired with energy-efficient central processing units (CPUs) — Arm’s specialty.
Barclays (BARC.L), Goldman Sachs (GS.N), JPMorgan Chase (JPM.N), and Mizuho Financial Group (8411.T) are the lead underwriters for the offering.
If the underwriters exercised their right to buy shares in Arm outright as part of the Greenshoe Option, it would require raising the IPO amount to $5.2 billion.
Arm, which has a total of 28 banks to go public, has not chosen a traditional “left-leaning” bank and will split the underwriter fee equally among the four big banks.
Arm expects to be traded on the Nasdaq Stock Exchange under the symbol “ARM”.
(Reporting by Mania Saini in Bengaluru) Additional reporting by Pablo Mayo Cerquero in London Editing by Aaron Coyoor, Nick Zieminski and Lincoln Vest
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