Arm’s IPO Soars with $51 Per Share, Propelling Company Valuation Beyond $54 Billion

Arm, the chip design firm that supplies core technology to companies including Apple and Nvidia, priced its initial public offering at $51 a share.

Arm’s fully diluted market cap, including outstanding restricted stock units, surpasses $54 billion at the $51 offer price. In a press release, the company stated that it will commence trading on Thursday under the symbol “ARM.”

This U.K.-based company plans to list at least 95.5 million American depository shares on the Nasdaq, with SoftBank, its current owner, retaining around 90% of the company’s outstanding shares.

The offering is priced at the upper end of Arm’s projected price range of $47 to $51.

According to its prospectus, Arm reported a less than 1% decline in revenue for its fiscal year ending in March, amounting to $2.68 billion. Net income in fiscal 2023 decreased by 22%, reaching $524 million.

Arm is capitalizing on the excitement surrounding artificial intelligence as it endeavors to make a splash in the tech IPO market following a hiatus of nearly two years. It is poised to be the largest technology offering of the year.

With a valuation of $54 billion, Arm’s market value as a chip company is remarkably high, rivaling that of Nvidia. At this valuation, Arm would have a price-to-earnings ratio of approximately 104, based on its latest fiscal year’s profits.

While Nvidia boasts a valuation of 108 times earnings, this is after projecting a revenue growth of 170% for the current quarter, driven by AI chips. The Invesco PHLX Semiconductor ETF, designed to gauge the performance of the 30 largest U.S. chip companies, has a price-to-earnings ratio of around 25.

Many key customers of Arm, including Apple, Google, Nvidia, Samsung, AMD, Intel, and Taiwan Semiconductor Manufacturing Company, have expressed their intent to purchase shares as part of the IPO. Arm’s technology is used in 99% of mobile processors worldwide.

Arm’s architecture outlines the fundamental operations of a central processor, such as arithmetic and accessing computer memory. Initially established in 1990 to manufacture chips for battery-powered devices, the company gained significant traction when its chips became widely utilized in smartphones. Arm’s instruction set consumes less power compared to the x86 architecture used in Intel and AMD’s PC and server chips.

While some of Arm’s customers only use the instruction set and design their own CPUs, Arm also licenses its own complete designs to chipmakers, which they can incorporate as CPU cores in their chips. Amazon utilizes Arm CPU designs in some of its server chips.

In an investor presentation, Arm officials expressed their belief that the company has the potential to expand beyond smartphones and to design more chips for data centers and AI applications. They anticipate the chip design market to be valued at approximately $250 billion by 2025.

Correction: A previous version of this story stated an incorrect IPO price.