Following a surge in investor demand, Arm is on track to price its IPO at the top or even above its indicated range of $47 to $51 per share. This would make it the largest U.S. stock market debut in the past two years. Given the IPO’s oversubscription, Arm is contemplating raising the price range, which could lead to a valuation exceeding $54.5 billion. However, no additional shares will be offered, ensuring that SoftBank retains a 90.6% stake in Arm post-IPO, as initially planned.
The valuation Arm is seeking is a step down from the $64 billion valuation at which SoftBank acquired a 25% stake in the company from its $100 billion Vision Fund. However, even at this reduced valuation, SoftBank stands to gain more than from its previously planned $40 billion deal to sell Arm to Nvidia Corp, which faced opposition from antitrust regulators and was eventually abandoned.
Arm, a dominant player in the mobile phone market with a 99% share, has faced challenges due to weak mobile demand during the global economic slowdown. This has resulted in stagnant revenues, with sales totaling $2.68 billion in the 12 months leading up to March, a slight dip from $2.7 billion in the previous period. However, Arm remains optimistic about its growth prospects in the cloud computing and automotive markets, where it holds a 10% and 41% share, respectively.
Investor Concerns
One area of scrutiny for potential investors is Arm’s exposure to the Chinese market, given the ongoing geopolitical tensions between China and the United States. Sales in China accounted for 24.5% of Arm’s $2.68 billion revenue in fiscal 2023.
