Mohit Oberoi
Arm Limited, which is owned by Japanese private equity giant SoftBank is looking to list in the US and could seek a valuation of upto $70 billion.
UK Prime Minister Rishi Sunak reportedly met Arm’s CEO Rene Haas where SoftBank’s Masayoshi Son joined through video call. Sunak tried to convince Arm to list in the UK.
However, Arm has decided to pass London for now even as it held the door open for a subsequent IPO in London later.
In his statement, Haas said, “After engagement with the British Government and the Financial Conduct Authority over several months, SoftBank and Arm have determined that pursuing a U.S.-only listing of Arm in 2023 is the best path forward for the company and its stakeholders.”
Notably, Arm was listed in London prior to its takeover by SoftBank in 2016. The company paid nearly $32 billion to acquire the British chipmaker. While it was among the biggest deals for SoftBank, it wasn’t as profitable.
In 2020, Nvidia agreed to acquire Arm for around $40 billion. However, the deal’s future looked dim from the onset amid regulatory scrutiny.
Hermann Hauser, a co-founder of Arm was among the most vocal critics of the deal. He started a “save Arm campaign” and opposed the sale of a European tech company to an American giant.
Nvidia and SoftBank Called Off the Deal in 2022
Meanwhile, Nvidia and Arm mutually called off the deal in 2022. Nvidia also forfeited the $1.25 billion cash that it had paid to SoftBank for the acquisition. The two parties blamed “significant regulatory challenges” and said that Arm would instead pursue a public listing.
Notably, Nvidia is betting on AI to beat the slowdown in some of the other businesses. In his prepared remarks in the Q4 fiscal year 2023 earnings release, Nvidia’s CEO Jensen Huang said, “AI is at an inflection point, setting up for broad adoption reaching into every industry.”
Companies like Google, Baidu, and Microsoft see AI as a key growth driver. There is a list of companies that are a play on AI.
Arm To List in the US and Could Seek Upto $70 Billion Valuation
Meanwhile, hopes of UK leadership have been dampened by Arm’s decision to list in the US.
A British government spokesperson said, “We continue to attract some of the most innovative and largest companies in the world – and note Arm’s commitment to expanding its presence in the UK, providing a boost to growth, jobs and investment.”
Arm is among the most widely awaited IPOs. The US IPO market was almost dead in 2022 and the number of IPOs slumped to a mere 149 as compared to 908 in 2022. The market is yet to recover amid Fed’s relentless rate hikes.
While Arm hasn’t disclosed the IPO pricing and valuation yet, Bloomberg reported that investment bankers are pitching it valuations ranging between $30-$70 billion. While the range is quite broad, it also reflects the current volatile times.
Tech stocks in particular have been quite volatile. The tech-heavy Nasdaq Composite lost around 33% in 2022 but in 2023 had its best January in over two decades.
Tech stocks have since come under pressure as inflation still looks quite sticky as was corroborated by the uptick in the February CPI reading.
As for Arm, it remains to be seen whether the company would be lucky this time after the botched merger with Nvidia.
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This article was written for Business 2 Community by Mohit Oberoi.
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