In what is set to be the largest IPO of the year, British chip designer Arm Ltd. is eyeing a valuation exceeding $52 billion, according to the company’s recent regulatory filings. Arm’s parent company, SoftBank Group, plans to offload approximately 10% of the total shares, with a share sale price set between $47 and $51. This move comes as Arm’s management embarks on a roadshow this week to woo potential investors and rally support for the offering.

The enormous scale of this offering positions it as a litmus test for the sustainability of the revived IPO market, following the successful, albeit smaller, share issues by restaurant chain Cava Group and D2C makeup seller Oddity Tech earlier this year. Several tech giants, many of whom are Arm’s clients, have hinted at buying up to $735 million worth of stock in the offering, which, despite being a small fraction of Arm’s projected value, could be a significant show of faith in the company that might entice other institutional investors to partake in the IPO.

Arm Ltd. Targets $52 Billion Valuation in Anticipated IPO

British-based chip designer Arm Ltd. is aiming for a valuation of over $52 billion in what is set to be this year’s largest initial public offering (IPO), as per the company’s most recent regulatory filing. Current owner, SoftBank Group, has plans to sell around 10% of the total outstanding shares, with share prices expected to be between $47 and $51 each. The filing comes as Arm’s management team gears up to meet potential investors starting Tuesday, in an effort to gather support for the IPO.

Largest IPO of the Year: A Key Test for Market

The sizeable offering, predicted to be the largest of 2021, will serve as a key test case for the resurgence of the IPO market. This follows successful but smaller issuances by Cava Group, a restaurant chain, in June and Oddity Tech, a direct-to-consumer seller of makeup brands, in July.

Tech Giants Show Interest in Arm’s Offering

Several technology companies, many being Arm’s customers, have suggested they could purchase a total of $735 million worth of stock in the offering, as stated in Tuesday’s filing. Despite representing a small fraction of the chip designer’s expected value, this could indicate a vote of confidence in the business, potentially encouraging other institutional investors to partake in the IPO. Companies expressing interest in the IPO include Advanced Micro Devices, Apple, Intel, Nvidia, and Samsung Electronics.

Lower Valuation But Expectations High

Arm’s targeted valuation of between $48 billion and $52 billion falls slightly below The Wall Street Journal’s reported range of $50 billion to $55 billion last week. Moreover, it’s lower than the $64 billion value implied by SoftBank’s recent acquisition of the remaining 25% stake in Arm from its Vision Fund unit. However, sources close to the deal have said the lower target valuation is not definitive and anticipate high demand during the roadshow, which could push prices higher.

SoftBank’s Strategy

The IPO offering enables SoftBank to gradually reduce its position in Arm, potentially yielding a larger return if the stock appreciates in the following months. Additionally, it provides SoftBank with additional capital to continue its extensive investments in tech startups, with a renewed focus on large-scale investments in artificial intelligence.

Final pricing is anticipated as early as next week, followed by Arm’s debut on the Nasdaq exchange.

Takeaways

The upcoming IPO of Arm Ltd. is a significant event, not just for the company but for the wider IPO market as well. If successful, it could further boost the already reviving IPO market and open doors for other tech companies planning to go public. The interest shown by tech giants such as Apple and Nvidia could be a positive signal to other potential investors. However, the final outcome will depend on the demand generated on the roadshow and the final pricing of the shares. It’s a crucial event to watch for everyone involved in the tech and investment sectors.