Arm Holdings, the British chip designer owned by SoftBank Group, has signed up some of the world’s biggest technology companies as investors for its planned initial public offering, which could value it at up to $55 billion.
Apple, Nvidia and others to invest in Arm’s IPO
According to sources familiar with the matter, customers of Arm Holdings such as Apple, Nvidia, Alphabet and Advanced Micro Devices have agreed to invest in the chip designer’s IPO, which is expected to take place in the first half of 2023. Intel, Samsung, Cadence Design Systems and Synopsys have also agreed to participate as investors in the offering, the sources added.
The talks are ongoing and some other potential investors are also currently in discussions to invest in the IPO, the sources said. Arm and SoftBank have set aside 10% of the shares to be sold in the IPO for its clients, Reuters has previously reported.
Apple, Nvidia and the other strategic investors have agreed to invest between $25 million and $100 million each in the blockbuster IPO, the sources said. The interest is fueled by a desire by companies to expand their commercial relationship with Arm and make sure rivals do not gain an edge, Reuters has previously reported.
SoftBank lowers valuation target for Arm
SoftBank, which acquired Arm for $32 billion in 2016, is targeting a valuation between $50 billion and $55 billion for the chip designer, Reuters reported earlier on Friday. Arm’s clients have agreed to invest in that valuation range, the sources said.
While it is possible that demand for Arm’s shares will lead to a higher valuation by the time the IPO prices, the move represents a climb-down from the $64 billion valuation at which SoftBank acquired the 25% stake in the company it did not already own from its $100 billion Vision Fund last month.
The lower valuation target reflects the challenges that Arm faces in maintaining its neutrality in the chip industry, as well as the regulatory hurdles that it needs to overcome to complete its IPO. Arm’s proposed sale to Nvidia for $40 billion was blocked by regulators in several countries over concerns that it would harm competition and innovation.
Arm’s role in the global chip industry
Arm is a leader in designing chips for smartphones, tablets, laptops and other devices. It licenses its technology to customers who then manufacture their own chips using Arm’s designs. Arm does not produce any chips itself, but rather collects royalties from its customers based on the number of chips they sell.
Arm’s business model allows it to avoid competing directly with its customers, while benefiting from their growth and innovation. Arm’s designs are used by more than 500 companies worldwide, including Apple, Samsung, Huawei, Qualcomm and MediaTek. Arm’s chips power more than 95% of the world’s smartphones and 85% of smart TVs.
Arm is also expanding into new markets such as cloud computing, artificial intelligence, internet of things and automotive. Arm aims to become a dominant player in these fields by offering low-power, high-performance and secure solutions that can run on various platforms and devices.