In light of the overwhelming demand, Arm is in discussions to potentially increase the price range, seeking a valuation exceeding $54.5 billion.
Arm, the chip designer under the ownership of SoftBank Group Corp, is on the verge of achieving its desired fully diluted valuation of $54.5 billion for its forthcoming initial public offering (IPO).
Sources close to the matter revealed that, buoyed by robust investor interest, Arm is contemplating the possibility of pricing the IPO at the top end or even above its projected range of $47 to $51 per share. This move could mark the largest U.S. stock market debut in the last two years.
In light of the overwhelming demand, Arm is in discussions to potentially increase the price range, seeking a valuation exceeding $54.5 billion. Alternatively, the company is considering maintaining the existing price range and pricing the IPO above it, which would also result in a valuation surpassing the initial target.
However, it’s important to note that Arm does not intend to release additional shares, as SoftBank remains committed to retaining a 90.6% stake in Arm after the IPO, with approximately $5 billion being raised, in line with their initial plan.
A final decision on whether to adjust the price range is expected within the next two days, contingent on key investor orders received on Monday, as indicated by an inside source.
While the sources caution that some anticipated investor commitments are still pending finalization, and the trajectory of orders may evolve, this development underscores the high level of interest surrounding Arm’s IPO.
Both SoftBank and Arm have refrained from immediate comments in response to requests for statements.
This valuation target represents a decrease from the $64 billion valuation SoftBank recently acquired when purchasing the remaining 25% stake in Arm from its Vision Fund. Despite this adjusted valuation, SoftBank is poised for a more favorable outcome than its prior $40 billion deal with Nvidia Corp, which was abandoned in the face of regulatory opposition last year.
Arm has already enlisted several major clients as cornerstone investors for the IPO, including industry giants like Apple, Nvidia, Alphabet, Advanced Micro Devices, Intel, and Samsung Electronics.
In its IPO marketing efforts, Arm is emphasizing its growth potential beyond dominating the mobile phone market. With global economic challenges impacting mobile demand, Arm’s revenue saw a slight dip. Nevertheless, the company foresees significant opportunities in the cloud computing and automotive sectors, driven by advancements in artificial intelligence.
Investors have been closely monitoring Arm’s exposure to China, especially in the context of geopolitical tensions. In fiscal 2023, sales in China constituted 24.5% of Arm’s total revenue, a factor that has been subject to scrutiny.
Arm is scheduled to launch its IPO in the coming days, and the final valuation will be a closely watched development in the financial market.