It has been known for some time that British chip maker Arm Limited is planning to float on the US stock market. Now, the SoftBank Group-owned company has put an official stamp on that goal and is now moving ahead with its blockbuster initial public offering (IPO) in the US later this year.
The company, which designs chips for smartphones, laptops, servers and other devices, has confidentially filed with regulators on April 29, setting the stage for what could be the largest IPO in the semiconductor industry.
Arm plans to sell its shares on Nasdaq, seeking to raise between $8 billion and $10 billion, according to people familiar with the matter. The exact timing and size of the IPO are subject to market conditions and regulatory approval.
While Arm will become public, SoftBank will retain a majority stake in the company. The Japanese firm acquired Arm in a $32 billion merger in 2016. According to SoftBank, Arm's IPO “will not have a material impact” on its overall financial performance.
The IPO is a strategic move for SoftBank, which is trying to recover from losses due to its investments in technology startups through its Vision Fund. The fund suffered a record $17.7 billion loss in the fiscal year ended March 2020, as the valuations of many of its portfolio companies plummeted amid the Covid-19 pandemic.
Changing Dynamics in the Chip Market
SoftBank had originally planned to sell Arm to Nvidia Corp., the US chip giant, for $40 billion last year, but the deal faced regulatory hurdles in the US, UK, China and Europe. Arm's IPO comes at a time when the global chip industry is facing a severe shortage of supply, driven by surging demand for electronics amid the pandemic and disruptions in production due to natural disasters and geopolitical tensions.
Last month I reported on Arm building its own chip that will be used for internal testing. While Arm is a powerhouse in the chip market, it does not make hardware. Instead, the company develops chip designs and licenses its blueprints to tech chip manufacturers. That includes Apple and Microsoft, as well as many other brands.
There has always been a claim that if Arm did develop its own processors, it would become a potent rival to companies such as Qualcomm. Arm's new chip does not fall into this category because the sources claim the company has no intention of selling or licensing the chip. Instead, it will be used in-house to test the company's designs.
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