Arm, the semiconductor designer from Cambridge, is gearing up for a blockbuster Nasdaq listing this week in what’s billed as the most eagerly anticipated initial public offering (IPO) of the year.
With the firm’s potentially $50bn listing imminent, here’s everything you need to know about the Arm IPO.
What is Arm?
Arm designs and licenses advanced semiconductor technology that powers many of the world’s electronic devices. From smartphones to video game consoles to servers, Arm estimates that 70% of the world’s population uses products powered by its chips. It has become a market leader, with customers including Nvidia, Apple, Samsung and Qualcomm.
The Cambridge-headquartered company was founded in 1990 as Advanced RISC Machines Ltd as a joint venture between Acorn Computers, Appl and VLSI Technology.
Arm completed its first IPO on the London Stock Exchange in 1998. It remained a public company for 18 years before it was delisted in 2016 following an acquisition by Japanese conglomerate SoftBank for $32bn.
When will it IPO?
Arm is expected to set a price range for its stock on 13 September. It will commence trading on the Nasdaq the following day.
How much will the Arm IPO raise?
In a regulatory filing, Arm said it is targeting a valuation of more than $50bn (£40bn). Shares will be priced between $47 and $51. With 95,500,000 shares being offered that puts the valuation between $50bn and $52bn.
The company said it may issue compensation shares to employees, giving it a total valuation of up to £54.5bn (£43.4bn) on a fully diluted basis.
Customers including AMD, Google and Nvidia have made non-binding commitments to anchor the IPO with a combined share purchase of $735m.
Parent company SoftBank is aiming to raise nearly $5bn from the public listing.
Why is the Arm IPO important?
The Arm IPO will likely be among the largest tech public listings of the year, giving global investors the opportunity to be part of the firm behind some of the most widely used semiconductor designs in the world.
This marks a major endorsement of Arm’s IP as some of the most valuable globally, particularly as the rise of AI has exacerbated the already enormous demand for semiconductors.
It will also act as a bellwether for investor appetite for new issues following a global slowdown this year.
For SoftBank, the sale of around 10% of Arm’s shares could give the conglomerate a much-needed windfall amid poor performances from its other tech investments.
For the UK’s capital markets, it signifies a missed opportunity. Arm is widely considered Britain’s biggest recent tech success story. Yet despite lobbying efforts from successive prime ministers, it snubbed the London Stock Exchange.
Arm IPO timeline:
While the upcoming second IPO is being hailed as a major win for SoftBank, it previously had very different plans for Arm.
In 2020, US chip giant Nvidia announced plans to acquire Arm for a $40bn (£31.6bn) deal that could have risen to $80bn (£63.4bn). While a deal with SoftBank was agreed, a regulatory probe from the UK, EU, US and China ultimately halted the acquisition over competition concerns.
Nvidia and its competitors rely on Arm’s designs, so it was determined by competition regulators that ownership risked giving Nvidia an unfair advantage, potentially allowing it to restrict rivals’ access to Arm’s intellectual property.
Arm took a significant hit after the collapsed acquisition, cutting hundreds of jobs in early 2022. Following the called-off deal, speculation began as to the fate of Arm. An IPO was expected, as stated by SoftBank CEO Masayoshi Son, but the question remained as to where.
London vs New York
The Nasdaq exchange in New York was always a front runner for the destination of Arm’s IPO, with Son teasing it as the preferred choice since it was first known a public launch was coming. This, however, didn’t stop advocates for the UK public markets fighting for a chance to bring back Arm.
A political campaign began to persuade SoftBank to list Arm in the UK. During his time in Downing Street, former Prime Minister Boris Johnson kicked off the British political campaign to convince Arm to IPO in London with a letter to SoftBank. Responsibility was then given to then-Chancellor Nadhim Zahawi, with continued the lobbying campaign with further talks with company leadership taking place.
A period of political turmoil in the UK didn’t stop these efforts, as the following two prime ministers, over a period of less than six months, kept these talks alive. Liz Truss and her chancellor, Kwasi Kwarteng, launched their own efforts before being taken over by Rishi Sunak.
The lobbying efforts were ultimately in vain as Son announced in the first half of 2023 the decision to list Arm in New York. The UK’s financial regulator came under criticism after this decision as claims were made that overly strict regulation in London was a key reason for the snub. The chief executive of the Financial Conduct Authority (FCA) defended the regulator’s role, stating there were numerous factors that determined the decision.
The FCA did, however, pledge to continue efforts to boost the appeal of the London markets, though prominent suggestions, such as a reduced regulatory requirement of publicly listed firms, were rejected by pension funds.
Arm filed its final registration statement to the Nasdaq in August, confirming that the company, under the ticker ARM, would be traded on the Global Select Market of the Nasdaq exchange.