IPO outlook boosted as Arm prepares for US listing

New York-bound Arm Holdings last night fired the starting gun on a blockbuster listing that will serve as a major test of confidence for the deal-starved IPO market.

The chip designer, which was bought by Japan’s SoftBank for £24 billion in 2016 and later came close to being acquired by NVIDIA Corp (NASDAQ:NVDA), announced yesterday that it had filed a registration statement with the US Securities and Exchange Commission.

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The number of American depositary shares and the price range for the proposed offering have yet to be determined but Wall Street is speculating at a value above $60 billion (£55.1 billion).

That would make Cambridge-based Arm, whose chip designs are found in 99% of smartphones, 2023’s biggest IPO after a barren couple of years for new listings. The last big float of this scale was in November 2021 when electric car maker Rivian Automotive Inc Class A (NASDAQ:RIVN) made its debut.

Arm makes its move against an improving backdrop after New York’s technology sector revived on companies racing to apply generative AI into their products and services.

Nvidia has led the way, with shares up more than 200% this year after its most recent update included the semiconductor industry’s largest increase to guidance for a single quarter. It is due to post results after tomorrow’s Wall Street closing bell.

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Arm says it works with over 1,000 technology partners “enabling artificial intelligence to work everywhere”. Its processor designs and software platforms have already enabled advanced computing in more than 250 billion chips, with technologies that power products from the sensor to the smartphone and the supercomputer. 

Arm said in its filing last night: “As the world moves increasingly towards artificial intelligence and machine learning-enabled computing, Arm will be central to this transition.

“We are working with leading companies such as Alphabet Inc Class A (NASDAQ:GOOGL), Cruise, Mercedes-Benz Group AG (XETRA:MBG), Meta Platforms Inc Class A (NASDAQ:META) and Nvidia to deploy Arm technology to run AI workloads."

The filing document showed total revenues relatively flat at $2.68 billion (£2.46 billion) for the year to March, with about a quarter of this figure generated by its China business.

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Arm was established in 1990 as a joint venture between Acorn Computers, Apple Computer, and VLSI Technology and soared in value after its original dual stock market listing in London and New York’s Nasdaq in April 1998.

SoftBank and Arm confirmed in March that New York would be the home for the stock market return but they kept the door open for a secondary listing in London at a later date.

Arm also confirmed its HQ, operations and “material IP” would remain in Cambridge and that it would continue to invest in operations in the UK, including a new site in Bristol.

The listing process in New York, which will begin with investor roadshows in early September, will fuel hopes for a turnaround in IPO activity later this year or in early 2024. That’s as long as macroeconomic conditions remain favourable and interest rates stabilise.

EY recently reported that US IPOs raised $10.1 billion (£9.3 billion) via 63 IPOs in the first half of this year, up 115% and 24% respectively on 2022 levels although the value figure was driven primarily by a few large deals.