Despite a slowdown in global smartphone sales, it does not affect Arm Holdings Ltd, a SoftBank Group subsidiary, from filing for its Initial Public Offering (IPO). Financial markets expect that ARM, with a valuation of $70 billion, may be this year's largest IPO.
ARM's listing is expected to rejuvenate the lackluster IPO market. Due to market volatility, several well-known startups postponed their listing plans last year. ARM has weathered the downturn in the chip industry better than most companies and has entered into burgeoning areas such as cloud computing.
Data shows, dragged down by factors such as a decline in global smartphone shipments, ARM's sales for the fiscal year ending March 31 dropped to $2.68 billion, and its quarterly sales ending June 30 decreased by 2.5% to $675 million. Although ARM relies on smartphones for its revenue and profit, the slight decline in revenue indicates an increase in chip revenue.
According to Counterpoint Research, the global smartphone market is at a near-decade low this year. ARM's chip technology supports most smartphones, including the iPhone, with more than 50% of its patent royalties coming from smartphones and consumer electronics.
Although ARM has not disclosed the number of shares it plans to sell or the valuation it seeks. Reuters previously reported that SoftBank plans to sell about 10% of ARM's shares in the IPO, seeking a valuation for the chip design company between $60 billion and $70 billion.
ARM originally planned to raise $8 billion to $10 billion through the IPO, but after the Vision Fund purchased 25% of the company from SoftBank, the market expects that the funds raised by ARM through the IPO may be reduced.
Founded in 1990, ARM is a joint venture of Acorn Computers, Apple Inc, and VLSI Technology. From 1998 to 2016, the company was publicly listed on the London Stock Exchange and NASDAQ. In 2016, SoftBank privatized it for $32 billion.
ARM's profits mainly come from technology licensing fees, chip design, and cloud computing, among others. The company's chip designs dominate the smartphone industry, but ARM's chip designs are also frequently used in personal laptops. Additionally, ARM-based chips are used in the central processing units for networking and servers, with the company holding a 10% market share in the cloud computing sector.
Data shows that last fiscal year, 24% of ARM's revenue came from China. However, the company hinted that future royalty and licensing income from China could decrease due to export restrictions implemented by Western countries and China's economic downturn.
Reuters reported early in the month that SoftBank had contacted several tech companies, including Amazon.com and Nvidia, which are considering investing in ARM's IPO. Many institutions have expressed that ARM's listing is expected to boost confidence in global IPOs and affect the upcoming listing plans of companies like Instacart, Klaviyo, and Birkenstock in the coming weeks.
For its IPO, ARM has selected 28 banks but did not choose the traditional "Lead Left" banks. Instead, it distributed the underwriter fees evenly among Barclays, Goldman Sachs, JPMorgan Chase, and Mizuho Financial Group.
