Chip designer Arm plans to increase profits by refining its business model

Arm files paperwork for what will likely be the biggest public offering this year

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Chip designer Arm Ltd. has filed its paperwork to go public, setting the scene for what is likely to be the biggest initial public offering this year.

The company made the announcement on Saturday, saying in a press release that it had confidentially submitted a draft registration statement on Form F-1 to the U.S. Securities and Exchange Commission. The offering will be for American depositary shares representing its ordinary shares, with size and price range to be determined.

While Arm did not say which exchange it was planning to list on, Reuters and previous reports suggest that Arm will list on the Nasdaq, long favored by tech companies large and small. Reuters also reports that the size and timing of the IPO are subject to market conditions; however, Arm is expected to seek to raise $8 billion to $10 billion in its listing.

What valuation Arm is seeking on the deal is also not clear. On March 6, it was reported that Arm would be chasing a valuation of $50 billion or over, and a later report on March 24 claimed that Arm would be seeking a valuation of $60 billion. Suggesting any figure at this point may be pure guesswork, Bloomberg reported that bankers have been pitched a valuation of between $30 billion and $70 billion for the listing.

Arm going to an IPO follows the collapse of a deal for Nvidia Corp. to acquire the company last year. Nvidia was reported to have originally agreed to pay $40 billion for Arm when it attempted to buy the company in September 2020. But the deal, which was later reported to have blown out to $66 billion, died in February 2022 when the companies, along with Arm owner SoftBank Group Corp., announced that it would no longer pursue the deal because of regulatory concerns.

Regulators in the U.S., the U.K. and the European Union had raised serious concerns about its effects on competition in the semiconductor industry, with the U.S. FTC also suing to block the deal in December 2021.

Arm-owner SoftBank’s decision to pursue an IPO this year amid adverse market conditions and contracting IPO activity may have more to do with its bottom line than any choice in timing.

The conglomerate, long one of the most prominent investors in the tech industry, has seen its fortunes turn for the worse over the last year, with SoftBank’s Vision Fund reporting a staggering $23 billion loss in the June quarter of last year. The fund then reported another loss of $6 billion in the December quarter, with some reports suggesting that the fund was halting new funding as a consequence, although the fund has made investments since.

Notable current SoftBank portfolio companies include ByteDance Ltd., the owner of TikTok, FlipKart Pte. Ltd. and GoTo, while previous investments include Uber Technologies Inc., Alibaba Group Holding Ltd., Didi Chixing Co. Ltd. and a stake in Nvidia purchased in 2019.

Image: Arm

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