NEW YORK, Sept 13 (Reuters) - Chip designer Arm Holdings Plc (ARM.O) secured a $54.5 billion valuation in its U.S. initial public offering (IPO) on Wednesday, seven years after its owner SoftBank Group Corp (9984.T) took the company private for $32 billion.
Yet even with this lower valuation, SoftBank fares better than its $40 billion deal to sell Arm to Nvidia Corp (NVDA.O), which it abandoned last year amid opposition from antitrust regulators.
Arm priced its IPO at $51 per share, at the top of its indicated range, raising $4.87 billion for SoftBank based on 95.5 million shares sold, the company said on Wednesday. Reuters first reported on Arm's decision on the pricing.
Arm's shares are scheduled to start trading in New York on Thursday.
Arm has already signed up many of its major clients as cornerstone investors in its IPO, including Apple (AAPL.O), Nvidia, Alphabet (GOOGL.O), Advanced Micro Devices (AMD.O), Intel (INTC.O) and Samsung Electronics (005930.KS).
Reuters was first to report on Tuesday that Arm received enough backing from investors to secure at least the top end of the price range between $47 and $51 per share in its initial public offering (IPO), including the possibility of the share sale being priced above range.
Arm launched its IPO marketing efforts last week, seeking to convince investors it has growth ahead of it, beyond the mobile phone market, which it dominates with a 99% share.
Weak mobile demand during a global economic slowdown has caused Arm's revenue to stagnate. Overall sales totaled $2.68 billion in the 12 months to the end of March, compared to $2.7 billion in the prior period.
Arm told potential investors in New York last Thursday that the cloud computing market, of which it has only a 10% share and therefore more room to expand, is expected to grow at an annual rate of 17% through 2025, partly thanks to advances in artificial intelligence. The automotive market, of which it commands 41%, is forecast to expand by 16%, compared with just 6% growth expected for the mobile market.
Arm also told investors its royalty fees, which account for most of its revenue, were accumulating since it started collecting them in the early 1990s. Royalty revenue came in at $1.68 billion at the latest fiscal year, up from $1.56 billion a year before.
An area of scrutiny for investors has been Arm's exposure to China, given geopolitical tensions with the United States that have led to a race to secure chip supplies. Sales in China contributed 24.5% of Arm's $2.68 billion revenue in fiscal 2023.
Reporting by Echo Wang and Anirban Sen in New York Editing by Sandra Maler, Greg Roumeliotis and Richard Chang
Our Standards: The Thomson Reuters Trust Principles.
Echo Wang is a correspondent at Reuters covering U.S. equity capital markets, and the intersection of Chinese business in the U.S, breaking news from U.S. crackdown on TikTok and Grindr, to restrictions Chinese companies face in listing in New York. She was the Reuters' Reporter of the Year in 2020. Contact: +9172873971
Anirban Sen is the Editor in Charge for U.S. M&A at Reuters in New York, where he leads the coverage of the biggest deals. After starting with Reuters in Bangalore in 2009, Anirban left in 2013 to work as a technology deals reporter in several leading business news outlets in India, including The Economic Times and Mint. Anirban rejoined Reuters in 2019 as Editor in Charge, Finance to lead a team of reporters, covering everything from investment banking to venture capital. Anirban holds a history degree from Jadavpur University and a post-graduate diploma in journalism from the Indian Institute of Journalism & New Media. Contact:+1 (646) 705 9409