Having Rebuffed The UK Stock Market, Now This Firm Could Become The Biggest Stock Listing Of The Year

After already withdrawing its shares from London, in what could be the biggest stock market listing of the year, the microchip designing giant Arm has now announced that it has filed to sell its shares in the US, The Guardian reports.

In March, the Cambridge-based firm said that it did not plan to pursue a London Stock Exchange listing. This was a significant blow as the decision came at a time when the UK government had just released the Spring Budget which revealed its extensive funding plans to try to accelerate the growth of the UK tech sector. 

In this rebuff of the UK market, the chip manufacturer announced that it would only be listing its shares on the New York Stock Market. 

Whilst it has been known for the last few months that the British chip maker is planning to float solely on the US market, now, the SoftBank-owned company has officially announced that it is planning to move ahead with its blockbuster initial public offering (IPO) in the US later this year in what could set the stage for the biggest stock market listing of the year.

A Turbulent Year For Arm And The Move Across The Pond

The past years have been tumultuous for Arm, a British semiconductor and software design company based in Cambridge. The company, which has been owned by the Japanese Softbank group since 2016, primarily designs ARM processors as well as chips and other software development tools.

After a shortage of semiconductors during the pandemic, the chip-making industry has faced a steadily slowing demand. Then, last year, Softbank was forced to call off its planned $40bn sale of Arm to technology group Nvidia after facing regulatory hurdles in the UK, US and the EU.

The past few years in a post-Covid world have been tricky on a global scale, even for large companies like Arm. The semiconductor company faced several financial difficulties as a result of the pandemic and Russia’s invasion of Ukraine which both caused a decline in shares in major tech companies.

Due to its losses, Arm decided to up sticks and look across the pond for financial redemption. Last year, the company listed its shares on the New York Stock Market and this year it has gone one step further in its decision to solely list in the US, with US exchanges seen to offer higher profiles and valuations. 

The IPO announced earlier this week is the latest strategic move from SoftBank in recovering its losses from a difficult financial period.

SoftBank’s IPO Plans

On May 1, Softbank issued a press release announcing it had “confidentially submitted a draft registration statement” for the listing to the US Securities and Exchange Commission (SEC).

This confirmed that SoftBank had indeed decided to move ahead with its IPO plans in the US. 

Before its official press release, SoftBank confidentially filed its decision with regulators on April 29 in what has set the stage to be the largest IPO in the semiconductor industry. 

Arm plans to sell its shares on Nasdaq and, whilst the press release announced that the “size and price for the proposed offering have yet to be determined”, reports have surfaced that the company plans to raise between $8bn and $10bn through the listing this year.

While this will mean Arm will become public, SoftBank will retain a majority stake in the company.

The IPO should help SoftBank recoup the huge losses it suffered due to investments in tech startups through its Vision Fund. The fund suffered a record $17.7bn loss in March 2020 as the valuations of many of its portfolio companies plummeted amid the pandemic.

SoftBank hopes that Arm’s IPO will boost its fortunes as it battles to turn around its giant Vision Fund after its losses in 2020.

How Arm’s Exit From London Will Effect The UK Tech Industry

Whilst Arm’s IPO and decision to float on the US exchange will benefit SoftBank, it is difficult to say the same for the UK.

Arm was once referred to as the “crown jewel” of the UK’s technology sector, but the company’s latest decision in March to leave the London Stock Exchange and move to the US has raised concerns that the UK market is not doing enough to attract tech company stock offerings. 

Reports surfaced in January that UK Prime Minister Rishi Sunak was working to restart talks with SoftBank about a possible London listing. Unfortunately for the UK, SoftBank has rebuffed all efforts to return to the London Stock Exchange.

This comes at a bad time for Mr Sunak’s government which is desperately trying to ignite the UK technology sector so that it can compete with the current tech top dogs, namely the US and China. 

UK Chancellor Jeremy Hunt announced that £900m would be set forward as part of the Spring Budget to boost the country’s tech industry, with Rishi Sunak announcing that a further £100m will go towards a specialised Task Force that will also work to accelerate the UK’s generative AI sector. 

At a time when a whopping £1bn is being put towards the UK tech sector, one of the largest tech companies withdrawing their shares from the market spells bad news for the government’s plans. 

So, while a successful stock market listing of Arm would be welcome news for its owner SoftBank, the decision paints a bad appearance of the UK tech sector which now looks like it is failing to attract major companies to its market.