It was 2016 when Japanese tech investor and SoftBank founder Masayoshi Son flew into Turkey by private jet to make one of the biggest bets of his career: a $32 billion take-private deal for the British chip manufacturer Arm.
That trip would turn into one of SoftBank’s largest checks ever, and the deal would interlock Arm’s future with the success of the Japanese investment firm’s overall portfolio. It would also be the beginning of a saga of regulatory and corporate governance headaches as SoftBank tries to exit. Should the IPO go successfully, SoftBank could potentially double its investment. This IPO may not return what an Nvidia acquisition would have a few years back, but it’s exactly the kind of liquidity event that SoftBank needs at the moment as it recovers from several consecutive quarters of losses.
Arm, the chip designer behind the “central processing units”—or CPUs—used in approximately 99% of the world’s smartphones, won’t report a formal planned share price until it meets with investors on its roadshow. But the company is reportedly expecting to seek a valuation of $60-70 billion at that point, according to Bloomberg, which would make it the largest IPO we’ve seen since 2021 and could definitely help reopen the broader market.
It’s taken a long time for SoftBank to get to this point. Back in late 2020, Nvidia announced plans to acquire the chipmaker. But that deal would collapse in 2022 after regulatory agencies in the U.S., U.K., and E.U. raised anti-competitive concerns. After that, SoftBank started making plans for an Arm IPO, but a spat over the corporate governance of Arm China—which operates independently and is primarily owned by SoftBank, Chinese investor HOPU Investment Management Company, and other Chinese parties—delayed those plans further, and SoftBank said last year it had complicated Arm's ability to audit the China operation. (In SEC filings, Arm said that litigation against Arm China has been “resolved favorably to Arm China,” but is subject to appeal.)
As Arm finally moves forward with its plans to go public, we are getting a better sense of the business. Revenue has fallen slightly over the last fiscal year, with Arm reporting $2.68 billion for the year ending in March 2023, compared to $2.7 billion the year prior. Net income was $524 million in the year ending in March 2023, compared to $549 million the year prior (net income was $388 million in 2021).
On brand with SoftBank’s newfound A.I. absolutism, Arm has positioned itself as a winner within the ongoing generative A.I. boom, as its CPUs run A.I. and machine learning workloads in devices like smartphones, cameras, or cars. Arm said in its IPO filings that it’s working with companies like Alphabet, GM’s Cruise, Meta, and Nvidia for running A.I. workloads.
But, per disclosures, A.I. and machine learning could also be a potential business risk, as Arm disclosed Monday evening. If new technologies start using algorithms that aren’t suitable for Arm’s general purpose CPUs, Arm processors would become less important in a chip.
This morning…The Securities and Exchange Commission is voting on whether to adopt the new fee disclosure rules for private funds that it proposed last year. This is the first major regulatory change for private funds since the financial crisis, and could necessitate sweeping new disclosure requirements from hedge funds, private equity shops, and VC firms (for more information on what the rules entail, you can read this previous edition of Term Sheet). The meeting begins at 10a.m. ET, and you can tune in here.
Cruising off the streets…Not long after California approved 24/7 robotaxi services in San Francisco, a Cruise vehicle collided with a firetruck. Cruise has agreed with state traffic safety officials to slash the size of its San Francisco fleet by half as a precautionary measure while the investigation is ongoing. You can read the story here.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.
