SoftBank’s chips unit Arm Holdings files for IPO

SoftBank Group Corp.’s semiconductor unit Arm Holdings Ltd has filed for an initial public offering (IPO) in what could be the biggest IPO in the US this year.

In its regulatory filing, the company said it has lined up 29 underwriters, with the offering being led by Barclays Capital Inc., Goldman Sachs and Co. LLC, J.P. Morgan Securities LLC, and Mizuho Securities USA LLC.

The company didn’t disclose key terms of the sale in its document, but calculations based on an internal deal concluded this month show that Arm may raise up to $10 billion at a valuation of $60-70 billion. SoftBank said in the filing that it bought its Vision Fund’s 25% stake in the chips unit this month for about $16.1 billion in a transaction that valued the company at $64 billion. 

To be sure, SoftBank had estimated Arm’s valuation by the end of June at about $45 billion, a 13% increase from the previous quarter. 

A successful listing on the NASDAQ may fetch a windfall for parent SoftBank, which reported losses for a third successive quarter in the three months to June. 

The Masayoshi Son-led company recorded a bigger-than-expected $3.3 billion loss in the April-to-June quarter despite its flagship SoftBank Vision Fund turning in a profit after reporting five consecutive quarters of losses on plunging valuations at tech firms from Alibaba to T-Mobile.

SoftBank is among big-ticket investors in India, with significant stakes in retailer Flipkart, payments firm Paytm, hotels aggregator OYO, and food delivery platform Swiggy.

The British chips firm develops and licenses high-performance, low-cost, and energy-efficient processors that power products from the sensor to the smartphone and the supercomputer. 

In the year to March, more than 260 companies, including Amazon.com, Inc., Alphabet Inc., Advanced Micro Devices, Inc., Intel Corp., NVIDIA Corp., Qualcomm Inc. and Samsung Electronics shipped Arm-based chips, the company said in its filing.

About 70% of the world’s population uses Arm-based products, with more than 30 billion Arm-based chips shipped in the fiscal to March, the company told the US Securities and Exchange Commission (SEC).

Now, as the world moves towards artificial intelligence (AI) and machine-learning (ML)-enabled computing, Arm will be central to this transition, the company said, adding that its processors already power workloads in billions of devices, including smartphones, cameras, digital TVs, cars and cloud data centers.

“In the emerging area of large language models, generative AI and autonomous driving, there will be a heightened emphasis on the low power acceleration of these algorithms,” the company said in the SEC filing, adding that it has made advances to accelerate future AI and ML algorithms. “We are working with leading companies such as Alphabet, Cruise LLC, Mercedes-Benz, Meta and NVIDIA to deploy Arm technology to run AI workloads.”

Arm was set up as a joint venture between Acorn Computers, Apple Computer, and VLSI Technology in 1990. It later got listed on the London Stock Exchange and the Nasdaq from 1998 until 2016, when its promoter, SoftBank Group, took the company off the exchanges.

In a separate development, The Economic Times reported on Monday that SoftBank sold its stake valued about $50 million, or ₹435 crore, in e-commerce firm FirstCry to three Indian family investment offices.

The report named Manipal Hospitals group chairman Ranjan Pai’s MEMG Family Office, Marico chairman Harsh Mariwala’s Sharrp Ventures, and veteran investment banker Hemendra Kothari’s DSP family office.

A spokesperson for SoftBank declined to comment.