Arm Valued at $54 Billion as Its Stocks Debut Today
British semiconductor designer Arm is set to go public today, with its shares listed on the Nasdaq stock exchange in the United States. The initial public offering (IPO) did not bring any surprises in terms of business valuations. At a share price of $51, coinciding with the upper end of the pricing range, Arm’s market capitalization will be $54.5 billion. This valuation is solid given current market conditions and customary multiples recognized by stock market experts.
With this IPO valuation, Arm’s offering could become the largest this year as intended. Japanese corporation SoftBank, which acquired Arm’s assets from the British stock market in 2016 for $32 billion, is expected to hold around 90% of the shares in this British semiconductor designer. After accounting for bank commissions and other expenses related to the IPO, SoftBank is expected to earn less than $5 billion from it.
In the IPO, 95.5 million Arm depositary receipts will be offered at $51 each and will begin trading on the Nasdaq Global Select Market under the symbol “ARM” today. IPO subscribers will also receive options to purchase an additional 7 million depositary receipts to cover any over-allotments, if any, within 30 days. The IPO is expected to close on September 18, 2023, subject to customary closing conditions. It’s not yet clear whether key Arm clients, such as TSMC and Intel, have followed through on their intentions to invest in the company. Arm had initially planned to allocate $735 million worth of shares to strategic investors.
In the previous fiscal year ending in March, Arm recorded revenue of $2.68 billion, a 1% sequential decrease, while net profit dropped by 22% to $524 million. The stock placement achieved a price-to-earnings ratio of approximately 104, which is quite impressive in today’s market. Among technology companies, only NVIDIA boasts a higher ratio, reaching 108, driven by the surge in interest in artificial intelligence.
However, Arm’s prospects in the AI field are less clear. While the company’s management has tried to convince investors that its strategy has been adjusted to align with the latest market trends and that the segment’s capacity will reach $250 billion by 2025, analysts from NewStreet Research have already recommended buying Arm’s shares, predicting that they could reach $59 each. According to experts, Arm has demonstrated financial stability over the past seven years, and now its revenue will grow due to an increased presence in new market segments. By 2026, the company’s market capitalization, according to analysts, could reach $82 billion, and its pre-tax profit could triple by that time.
- I'm Vasyl Kolomiiets, a seasoned tech journalist regularly contributing to global publications. Having a profound background in information technologies, I seamlessly blended my technical expertise with my passion for writing, venturing into technology journalism. I've covered a wide range of topics including cutting-edge developments and their impacts on society, contributing to leading tech platforms.
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