Chip designer ARM Holdings secured a US$54.5-billion valuation in its initial public offering (IPO) on Wednesday, seven years after its owner SoftBank Group took the company private for $32-billion.

The IPO represents a climb-down from the $64-billion valuation at which SoftBank last month acquired the 25% stake it did not already own in the company from the $100-billion Vision Fund it manages.

Yet even with this lower valuation, SoftBank fares better than its $40-billion deal to sell ARM to Nvidia, which it abandoned last year amid opposition from antitrust regulators.

ARM priced its IPO at $51/share, at the top of its indicated range, raising $4.9-billion for SoftBank based on 95.5 million shares sold, the company said on Wednesday. ARM’s shares are scheduled to start trading in New York on Thursday.

ARM has already signed up many of its major clients as cornerstone investors in its IPO, including Apple, Nvidia, Alphabet, AMD, Intel and Samsung Electronics.

Arm launched its IPO marketing efforts last week, seeking to convince investors it has growth ahead of it, beyond the mobile phone market, which it dominates with a 99% share.

Weak mobile demand during a global economic slowdown has caused ARM’s revenue to stagnate. Overall sales totalled $2.68-billion in the 12 months to the end of March, compared to $2.7-billion in the prior period.

Cloud opportunity

ARM told potential investors in New York last Thursday that the cloud computing market, of which it has only a 10% share and therefore more room to expand, is expected to grow at an annual rate of 17% through to 2025, partly thanks to advances in artificial intelligence. The automotive market, of which it commands 41%, is forecast to expand by 16%, compared with just 6% growth expected for the mobile market.

ARM also told investors its royalty fees, which account for most of its revenue, were accumulating since it started collecting them in the early 1990s. Royalty revenue came in at $1.68-billion at the latest fiscal year, up from $1.56-billion a year before.

An area of scrutiny for investors has been ARM’s exposure to China, given geopolitical tensions with the US that have led to a race to secure chip supplies. Sales in China contributed 24.5% of ARM’s $2.68-billion revenue in fiscal 2023. — Echo Wang and Anirban Sen, (c) 2023 Reuters