Cambridge-based company Arm Set to Sell Shares in the US
Arm, a prominent British microchip designing company, has recently disclosed its intention to sell shares in the US market.
The company, headquartered in Cambridge, has unveiled its strategy to become publicly listed on New York’s Nasdaq exchange, with this significant move scheduled for September. While specific details regarding the volume of shares to be offered and the associated price remain undisclosed, this impending initial public offering (IPO) has the potential to be the most substantial listing since late 2021.
Decision Against London Listing and Valuation Aspirations
In a notable development earlier this year, Arm decided against listing its shares on the London Stock Exchange, dealing a blow to the UK. Instead, the company opted for a US listing, reflecting its confidence in the American financial markets.
Arm has now formally submitted a registration statement outlining its proposed IPO. The precise number of shares to be made available to the public and the corresponding price range are yet to be determined. However, industry insiders speculate that Arm aims for a valuation ranging between $60 billion (£47 billion) to $70 billion.
Arm’s Evolution
Arm’s journey is marked by its acquisition by Japanese conglomerate Softbank in 2016, in a deal valued at £23.4 billion.
Prior to this acquisition, the company had maintained dual listings on both the London and New York stock exchanges for 18 years. The designs and technologies developed by Arm play a pivotal role in the chip manufacturing processes of key players such as the Taiwan Semiconductor Manufacturing Company, as well as tech giants Apple and Samsung, who leverage these innovations to create their own chips.
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The IPO Process
An IPO serves as a pivotal moment in a private company’s trajectory, facilitating its transition to a publicly traded entity. This change enables investors to engage in buying and selling the company’s shares on designated stock exchanges.
During an IPO, a company extends its shares to potential investors before formally listing on the exchange. The pricing of these shares is typically established by investment banks tasked with overseeing the IPO process. Once trading commences, supply and demand dynamics govern share prices, ultimately determining the company’s market capitalisation.
Global Impact and Continuation of UK Operations
Founded in 1990, Arm has garnered a reputation as the “crown jewel” within the UK’s tech landscape. Although discussions between Arm’s owner and UK Prime Minister Rishi Sunak hinted at a possible listing on the London Stock Exchange, the company ultimately chose the US as its IPO destination, citing it as the optimal route forward.
This strategic decision raised concerns regarding the UK’s competitiveness in attracting tech-related IPOs. Despite this, Arm’s CEO Rene Haas reassured stakeholders that the company’s material intellectual property, headquarters, and operations will remain firmly grounded in the UK.
Pursuing IPO Amidst Global Challenges
In the face of turbulent global conditions, including Russia’s actions in Ukraine and the aftermath of the Covid-19 pandemic, Arm’s parent company, Softbank, demonstrates resolute determination to proceed with the multi-billion dollar share sale. The chip-making industry encountered adversity due to a shortage of semiconductors during the pandemic, resulting in reduced demand.
Arm’s financial performance for the fiscal year ended March 31 reflected this challenge, with sales dipping to $2.68 billion. Furthermore, sales for the quarter ending June 30 saw a 2.5% decline to $675 million.
In conclusion, Arm’s decision to embark on an IPO on the Nasdaq, eschewing London, underscores its confidence in the US financial market. This move also raises broader questions about the UK’s ability to attract tech-focused IPOs.
Nevertheless, Arm’s legacy, its role in the global tech ecosystem, and its continued commitment to the UK underscore the significance of this impending transition from private to publicly listed entity.