SoftBank's Arm hits $54.5 billion valuation in 2023's biggest IPO
Chip designer Arm Holdings has achieved a $54.5 billion valuation in its initial public offering (IPO) in the US, making it the biggest IPO of 2023. This milestone comes seven years after the company was taken private by its owner, SoftBank Group, for $32 billion. Arm Holdings priced its IPO at $51 per share and is set to begin trading in New York today.
SoftBank's journey from acquisition to IPO
The IPO marks a decrease in valuation compared to the $64 billion at which SoftBank purchased the remaining 25% stake in Arm just last month, completing its acquisition from the $100 billion Vision Fund it manages. However, despite this reduction, SoftBank's current valuation still surpasses the $40 billion deal it attempted to finalize with NVIDIA, which it ultimately abandoned last year due to opposition from antitrust regulators.
Major clients back Arm's diversification plans
Arm has enlisted several key clients as cornerstone investors in its IPO, including prominent names such as Apple, Alphabet, Advanced Micro Devices, Intel, NVIDIA, and Samsung Electronics. The company sees growth potential beyond the mobile phone market, with a focus on cloud computing and automotive markets. The cloud computing market is expected to grow at an annual rate of 17% through 2025, while the automotive market is predicted to expand by 16%.
Royalty revenue and growth amid geopolitical tensions
Arm's royalty fees account for most of its revenue, with royalty revenue reaching $1.68 billion in the latest fiscal year. The ongoing geopolitical tensions between Beijing and Washington have intensified the competition for semiconductor supplies. In fiscal 2023, 24.5% of Arm's $2.68 billion revenue came from sales in China. This high exposure to the Chinese market has raised questions and considerations among investors in the context of the broader geopolitical landscape.
