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ARM Holdings IPO

After a two-year drought for the US IPO market, technology IPOs have made a strong comeback, spearheaded by the year's biggest deal - ARM makes its debut on the Nasdaq.

Whether you're gearing up for those crucial investment banking interviews, staying updated with the latest news, or exploring investment opportunities, there's one hot topic you absolutely can't afford to miss: the ARM IPO. Dive into our comprehensive analysis of ARM, where we unpack everything you need to know about ARM.

Complete Timeline

Founded in 1990 as a joint venture between Acorn Computers, Apple, and VLSI Technology, ARM was then known as Advanced RISC Machines Limited. It took the company eight years to go public. On April 17, 1998, Arm Holdings PLC completed a joint listing on both the London Stock Exchange and Nasdaq with an initial public offering at £5.75. In July 2016, Japan-based Softbank agreed to acquire Arm in a deal worth $32 billion, taking it private. The investment holding firm agreed to pay £17 per share. Recently, the chip designer made its public offering again last week making it the largest US-based IPO in 2023. Arm began trading on Nasdaq under the symbol ARM and the IPO closed on September 18.

ARM's Business

ARM is a British semiconductor chip company, whose primary business is designing processors and other chips, as well as systems and platforms (Fabless company). ARM doesn’t manufacture computer processors itself but sells licenses to other production firms.

To understand the business model, obtaining a processor license essentially provides you with permission to utilize a microprocessor or GPU meticulously crafted by ARM. Although the core design remains unaltered, you are granted the flexibility to adapt and implement it in accordance with your particular requirements and preferences. For instance, Samsung's Exynos 5 Octa, which incorporates four ARM Cortex A7 cores and four ARM Cortex A15 cores; this is a prime example of processor licenses.

ARM does provide guidelines on how to translate these designs into silicon, but the actual implementation and the pursuit of optimal performance in terms of frequency and power consumption are left in the hands of the license buyers.

Essentially, ARM makes most of its money through the royalties it collects every time a company makes a chip using its design. And thanks to the company’s market dominance, over 160 billion chips have been made based on ARM designs as of last year. It's estimated nearly 70% of the world's population uses an ARM-based product.

Semiconductor Design IP Market Share (2011-2022)

Deal Overview

ARM Holdings (ARM) was listed on Thursday 14 September 2023. A total of 95.5 million American Depositary Shares (ADSs) are being offered by the selling shareholder, a wholly-owned subsidiary of SoftBank Group Corp., in the IPO. Arm expects the selling shareholder to grant the underwriters an option to purchase up to an additional 7,000,000 ADSs to cover over-allotments. Shares priced at the top end of its targeted range at $51, giving Arm a valuation of $54.5 billion. The IPO was oversubscribed more than 10 times, according to Bloomberg News.

Raine Securities LLC is acting as financial advisor in connection with the proposed IPO. Barclays, Goldman Sachs & Co. LLC, J.P. Morgan, and Mizuho are acting as joint book-running managers for the proposed IPO.

According to Reuters, the company was seeking an IPO because private investors in the SoftBank-led Vision Fund – who own 25% of ARM – wanted to be able to cash in through an IPO. However, SoftBank has just bought back Vision Fund's 25% ahead of the listing. ARM also wants to be able to give stock options as incentives to employees.

Key Financials

Arm enjoyed a strong market debut, concluding with a roughly 25% increase in its stock price. However, some analysts believe that the stock's valuation is already high, and the positive aspects of the company are already reflected in its price.

Arm Holdings has a prominent position in the mobile industry, with its architecture serving as the basis for smartphones. Nevertheless, the semiconductor market has evolved beyond the era of smartphones. The next phase of growth is expected to hinge on high-performance computing and the Internet of Things (IoT). In these areas, Arm may encounter challenges when competing against other companies in the market.

The successful debut by Arm would represent a significant win for SoftBank, given that SoftBank's Vision Fund incurred a record loss of $30 billion in the previous year. Besides, the listing of Arm could stimulate the US IPO market. Companies like Instacart Inc., an online grocery-delivery firm, and Klaviyo Inc., a provider of marketing and data automation services, are among those gearing up for their IPOs.


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