The British computer chip designer Arm has reportedly lowered its targeted valuation as the business speaks to investors before a long-awaited stock market float in New York.
Arm is targeting a valuation between $50bn and $55bn (£40bn to £44bn), down from the $64bn valuation given by its owner, Softbank, in a transaction last month, Reuters first reported.
The Cambridge-based company, whose designs are used in computer chips that run most of the world’s mobile phones, is planning to talk to potential investors in the coming days, ahead of an initial public offering (IPO) of shares as soon as next week.
Arm has been owned privately by the Japanese investment company SoftBank since 2016, when it was taken off the London Stock Exchange in a £24bn deal. Many analysts think its valuation is now higher, partly because chip companies are set to benefit from the hype around artificial intelligence.
Arm is an important player in the global chip sector. While it does not make chips, its designs are relied upon by some of the world’s largest computing companies, including Apple and Samsung, the biggest mobile phone manufacturers.
Some of Arm’s clients are thought to be keen to gain influence over the company by buying shares. Reuters reported that Apple, Samsung, the chip companies Nvidia, Advanced Micro Devices, Intel and Cadence, and Google’s owner, Alphabet, have agreed to invest in the IPO. The potential investors were approached for comment.
SoftBank, led by the Japanese billionaire Masayoshi Son, has been seeking to realise the value of its investment for several years. A $40bn deal to sell Arm to Nvidia fell through in 2022 after regulators objected, saying it could harm competition.
Since then SoftBank has tried to persuade investors that Arm is worth as much as $80bn, according to reports. SoftBank valued Arm at $64bn last month in transaction with a fund that it controls.
Even at a lower $50bn valuation, the Arm stock market offering would be the biggest since the electric pickup truck maker Rivian’s $70bn float in November 2021.
The Arm listing comes at a quiet time for IPOs. Rising interest rates have made investors mark down the value of future earnings, and have made fundraising more difficult. However, 28 banks – led by Barclays, Goldman Sachs, JP Morgan and Japan’s Mizuho – will share in what is expected to be a fees bonanza for drumming up interest in the listing.
The listing will take place on New York’s Nasdaq stock exchange, which is home to many of the world’s biggest technology companies. The UK prime minister, Rishi Sunak, attempted to woo Arm to relist in London, where it was previously a member of the FTSE 100 index, but the lobbying effort failed.
SoftBank could still own as much as 90% of Arm after the float, meaning it would retain significant influence in a sector that is becoming increasingly geopolitically important, amid competition between the US and China for control of cutting-edge chips. Arm revealed in its filing announcing the planned listing that it earns a quarter of its revenues from China, making it vulnerable to policy changes.
Arm was approached for comment.
