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SoftBank’s $50bn flotation of Arm is more than five times oversubscribed, according to bankers pitching investors on the biggest initial public offering in nearly two years. The UK-based chip designer is expected to experience accelerating revenue growth due to the artificial intelligence boom.
Despite concerns about a drop in profits in Arm’s most recent quarter, advisers working on the Nasdaq listing said there was “little price sensitivity among investors”. Many of the investors are required to buy Arm shares because of the company’s inclusion in indices.
During the IPO, brokers from the 28-strong army of banks selling Arm’s shares gathered more than 100 fund managers to convince them of the potential in the AI market. “AI is going to be everywhere and it all runs on Arm,” said Rene Haas, the CEO of Arm.
Arm executives projected revenue growth above analysts’ expectations, indicating potential growth of at least 20% in the financial year ending March 2025. Despite stagnation in the smartphone chip market, Arm expects growth from AI and data center customers. The company also highlighted the success of chipmaker Nvidia in the AI market, with its valuation reaching $1.2tn this year.
However, some fund managers have raised concerns about the large number of bankers involved in the IPO, suggesting it may be difficult to sell the Arm story. Analysts have also debated Arm’s valuation, with some arguing that it is not worth more than $40bn.
Regardless, SoftBank, the parent company of Arm, is expected to use the IPO as a means of financing. With its belief that Arm will be crucial in the future of computing, SoftBank aims to retain more than 90% of the company. This strategy will allow SoftBank to benefit from Arm’s success while also providing a source of financing for other areas.
In conclusion, the IPO for Arm Ltd is generating significant interest from investors, demonstrating confidence in the potential of the AI market. Despite some concerns and debates on valuation, SoftBank sees the IPO as an opportunity to secure financing and maintain its exposure to Arm’s future success.
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