The British microchip company Arm has priced its New York IPO at $51 a share, giving it a valuation of more than $52bn (£42bn) ahead of its Wall Street debut on Thursday.
The pricing, confirmed by Arm on Wednesday evening, is at the top of the $47 to $51 range Arm had said last week, suggesting strong demand from investors.
The listing is set to be the biggest of the year and is being closely watched as a sign of demand for new stock market floats after months of subdued activity.
Arm’s owner, Japan’s SoftBank, paid £24bn for the company in 2016. It is returning the company to the public markets after seven years amid concerns over its investing success following high-profile disappointments such as WeWork.
Arm this year opted to float in New York, rather than London where it had previously been listed, despite a concerted effort from Rishi Sunak.
Tech giants including Apple, Google and Nvidia are expected to invest in the flotation. SoftBank is only selling around 10pc of the company, but could use a new market in the shares to raise billions in debt using Arm’s shares as collateral.
Arm’s microchip designs are used in billions of smartphones and other devices, and the company estimates that 70pc of the world’s population uses gadgets powered by its technology.
However, investors have raised concerns over the company’s exposure to China, while its revenue fell last year.
The company has reassured investors during an IPO roadshow that it has strong growth potential, leading to demand for shares significantly outstripping supply.
Despite the share pricing, Arm is still valued significantly below $64bn, the valuation at which SoftBank bought the 25pc of the company it did not own from its separate Vision Fund last month.
Executives and staff are due to share around $2bn in stock-based compensation as a result of the IPO, while chief executive Rene Haas is due a $40m bonus.
The IPO Pricing of British Microchip Company Arm
The British microchip company Arm has set the IPO price for its entry into the New York Stock Exchange at $51 per share. This valuation amounts to over $52 billion (£42 billion), positioning Arm for its Wall Street debut on Thursday. Arm’s pricing decision, announced on Wednesday evening, falls on the higher end of the $47 to $51 range previously stated by the company, indicating strong investor demand.
As the largest IPO of the year, Arm’s listing is particularly significant as it reflects the market’s interest in new stock market floats after a prolonged period of reduced activity. Owned by Japan’s SoftBank since its acquisition for £24 billion in 2016, Arm’s return to public markets after seven years raises questions about its investment success, considering high-profile letdowns like WeWork.
Despite efforts from Chancellor of the Exchequer Rishi Sunak to keep Arm in London, the company chose to go public in New York this year. Tech giants including Apple, Google, and Nvidia are expected to invest in Arm’s flotation. SoftBank plans to sell only around 10% of the company but can potentially leverage the new market for shares to secure billions in debt using Arm’s shares as collateral.
Arm’s microchip designs are crucial components in many smartphones and electronic devices globally. The company estimates that 70% of the world’s population uses gadgets powered by its technology. Nevertheless, concerns have emerged regarding Arm’s exposure to China, especially considering its revenue decline last year.
During an IPO roadshow, Arm reassured investors about its strong growth potential, triggering overwhelming demand for shares that exceeded supply. Despite the pricing of shares, Arm’s current valuation falls significantly below the $64 billion figure at which SoftBank purchased the remaining 25% stake in the company last month through the Vision Fund.
On account of the IPO, Arm’s executives and staff are expected to receive approximately $2 billion in stock-based compensation. Additionally, CEO Rene Haas is slated to receive a $40 million bonus.
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