SoftBank-backed Arm prices shares at $51 apiece ahead of IPO

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Shares in UK chip designer Arm have been priced at $51 per share before trading begins on Thursday, giving the company a market valuation of $52.3bn.

The price is at the top end of a range of $47-$51 per share due to high demand that resulted in its stock being more than five times oversubscribed.

The listing has been watched closely as a barometer for new tech IPOs. It is the largest listing in two years, since electric-truck maker Rivian debuted in 2021, raising about $12bn. Tech valuations have slumped from their coronavirus pandemic-era highs in the past 18 months amid economic uncertainty and rising interest rates.

The IPO will raise about $4.9bn for SoftBank, which has offered 9.4 per cent of the company’s stock. After the IPO, the Japanese group will still control roughly 90 per cent of the company’s shares.

Big Tech customers of Arm’s chip designs, including Apple, Google, Nvidia, Samsung, Intel and TSMC, have indicated they would buy $735mn worth of Arm shares at the IPO price.

The banks underwriting the listing closed orders for shares on Tuesday, a day earlier than planned. Goldman Sachs, JPMorgan and BofA Securities are among a 28-strong army of banks selling the Arm IPO.

Earlier on Wednesday, several bankers involved in the IPO said they expected the price to reach as high as $52 a share.

High demand has helped to crack open a window for tech listings in the US after a dearth of deals this year.

On Monday, the San Francisco-based ecommerce company Instacart announced the price range for an IPO that would raise up to $616mn. On a fully diluted basis the listing would value the group at up to $9.3bn, less than a quarter of its private valuation two years ago.

Marketing automation company Klaviyo also announced its IPO pricing on Monday. It said it would sell 19.2mn shares at a range of $25 to $27 a share. This would value the company at up to $6.3bn. It was last valued by venture capitalists at $9.5bn.

SoftBank paid $32bn to acquire Arm in 2016, but the IPO price will be below the $64bn valuation implied less than a month ago in a transaction with its own Vision Fund, the $100bn Saudi-backed investment vehicle the Japanese company manages.

Arm’s core market of smartphone chips has stagnated this year, but it is hoping for growth from artificial intelligence and data centre customers, despite playing only a peripheral role in the technology required to build the kinds of large language models that power ChatGPT and other generative AI systems.

SoftBank originally hoped the deal would value Arm at as much as $70bn. However, it reported flat sales in its latest financial year, and investors have expressed concerns about a drop in profits in the past quarter and the company’s exposure to multiple risks in China.