Arm, the chip designer owned by SoftBank Group Corp, has successfully secured enough investor support to achieve a valuation of $54.5 billion for its upcoming initial public offering (IPO). In a strategic move, Arm will only accept the top end of its indicated price range, potentially pushing its IPO price above the $47 to $51 per share range.
By pricing the IPO conservatively, Arm’s decision is likely to boost the chances of strong trading when its shares begin trading in New York on Thursday. Despite this tactful move, the valuation sought by Arm is lower than the $64 billion at which SoftBank initially acquired the remaining 25% stake in the company.
As part of its IPO efforts, Arm has already secured notable clients as cornerstone investors. These include tech giants such as Apple, Nvidia, Alphabet, AMD, Intel, and Samsung Electronics.
Arm’s objective is to convince potential investors of its growth potential beyond the mobile phone market, where it currently dominates with an overwhelming 99% share. The company aims to highlight its expansion prospects in other sectors, particularly the cloud computing market where it claims a 10% market share, and the automotive market where it commands a 41% share.
Arm’s revenue primarily derives from royalty fees, which have surged to $1.68 billion in the latest fiscal year, constituting the majority of its revenue. However, investors are closely scrutinizing Arm’s exposure to China. Sales in the country contributed a significant 24.5% of the company’s revenue in fiscal 2023.
With its IPO on the horizon, Arm’s investors will be eagerly awaiting its performance in the public market. The pricing strategy and impressive list of cornerstone investors suggest that Arm is positioning itself for success and is hopeful that the growth potential it has outlined will be enough to entice investors in its debut.
