To reach the fully diluted valuation of $54.5 billion, it sought in its initial public offering (IPO) at the top of its indicated range. Arm, the chip designer owned by SoftBank Group Corp (9984.T), is almost there and may even ask investors to value it higher, according to people familiar with the situation on Sunday.
When its underwriters shut their books on Wednesday for the largest U.S. stock market debut in two years, Arm will likely be able to price the IPO at the top or above its $47-to-$51 per share range due to the high investor demand, the people said.
Due to the IPO’s oversubscription, the sources said that Arm is talking about extending the price range and aiming for a value of more than $54.5 billion. The sources noted that Arm is also considering sticking with the current price range and pricing the IPO above it on Wednesday, which would also result in a value greater than $54.5 billion.
However, given that SoftBank intends to keep a 90.6% interest in Arm after the roughly $5 billion IPO, as initially intended, Arm won’t issue additional shares, the sources said.
According to one of the sources, when some significant orders from investors arrive on Monday, a decision about expanding the price range will be made in the following two days.
The sources warned that certain expected investor commitments had not been confirmed, and the trajectory of the orders may potentially alter since they spoke on the condition of anonymity to discuss private discussions.
Requests for comment from SoftBank and Arm did not immediately get a response.
Compared to the $64 billion value at which SoftBank last month purchased the 25% share in the firm that it did not already hold from the $100 billion Vision Fund it administers, Arm’s current valuation indicates a climb-down.
SoftBank would still fare better than its $40 billion agreement to sell Arm to Nvidia Corp (NVDA.O), which it abandoned last year in response to antitrust authorities’ objections, despite this reduced value.
Apple (AAPL.O), Nvidia, Alphabet (GOOGL.O), Advanced Micro Devices (AMD.O), Intel (INTC.O), and Samsung Electronics (005930. K.S.) are just a few of the notable companies that Arm has already secured as cornerstone investors in its IPO.
Arm began promoting its IPO this week to persuade investors that it had growth opportunities outside of the mobile phone sector, which it now has a 99% share of.
Arm’s revenue has been flat as the global economy has slowed down due to weak mobile demand. Compared to the previous year’s $2.7 billion in revenue, the total for the 12 months ending in March was $2.68 billion.
The cloud computing industry, of which Arm only has a 10% share and hence more space to grow, is anticipated to increase at an annual rate of 17% through 2025, partly because of developments in artificial intelligence, Arm informed prospective investors in New York on Thursday. The automobile industry, which now controls 41% of global sales, is anticipated to rise by 16%, while the mobile sector is only anticipated to grow by 6%.
Additionally, Arm informed investors that they had been building up since it began collecting royalties in the early 1990s, which make up the majority of its earnings. In the most recent fiscal year, royalties brought in $1.68 billion, up from $1.56 billion the year before.
Given geopolitical concerns with the U.S. that have caused a rush to secure chip supply, investors have watched Arm’s exposure to China closely. 24.5% of Arm’s $2.68 billion in revenue for the fiscal year 2023 came from sales in China.
