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Arm Mulls Raising IPO Price Range amid Strong Investor Interest

Arm Holdings Ltd., the renowned chip designer owned by SoftBank Group Corp (TYO: 9984) is reportedly contemplating raising the price range of its highly anticipated Initial Public Offering (IPO). This move comes after meetings with potential investors revealed overwhelming interest in what is poised to become the world’s largest listing of the year.

Arm Exploring IPO Price Options

When Arm first filed for its IPO, it set an initial price range of $47 to $51 per share, potentially valuing the company at $54.5 billion at the upper end of this range. This valuation represented a departure from earlier estimates, which had pegged the company’s worth in the range of $60 billion to $70 billion. Now, in light of robust demand from investors, Arm is considering revising its price range upward.

Alternatively, Arm is exploring the possibility of retaining the existing price range but pricing the IPO shares at a level above this range. This approach would similarly lead to a valuation exceeding the $54.5 billion benchmark. This strategy allows Arm to maintain consistency in its pricing guidance while capitalizing on robust investor enthusiasm.

Arm’s journey to the public market began in 2020 when SoftBank began exploring the possibility of listing the company. The plan faced delays and obstacles, but with the resurgence of the semiconductor industry and growing demand for Arm’s semiconductor designs, the timing seemed ripe for an IPO.

Despite the potential valuation adjustments, SoftBank remains steadfast in its commitment to retain a 90.6% stake in Arm Holdings following the IPO. This decision aligns with SoftBank’s long-term vision for Arm and emphasizes the strategic importance of maintaining a significant interest in the chip design leader.

Arm’s decision regarding a potential adjustment to its pricing strategy is pending the outcome of crucial investor orders scheduled for today. These orders are pivotal in gauging the level of demand from institutional and retail investors. However, the sources caution that the landscape remains fluid, with some investor commitments yet to be solidified and the trajectory of orders subject to a change.

Arm’s Diverse Client Base and Growth Prospects

Arm has successfully secured a lineup of cornerstone investors for its IPO, including some of the biggest names in the tech industry. These partnerships are a testament to Arm’s significance and the confidence of industry leaders in its future.

Arm, which currently dominates the mobile phone market with a 99% share, is positioning itself for growth beyond mobile devices. Its revenue has been impacted by weak mobile demand during global economic slowdowns, causing stagnation. In the 12 months ending March, Arm’s sales totaled $2.68 billion, slightly lower than the prior period’s $2.7 billion.

However, Arm is making a compelling case to investors by emphasizing its potential in other markets. Arm has only a 10% share in the cloud computing market, offering room for expansion. The company cited an expected annual growth rate of 17% through 2025, driven in part by advances in Artificial Intelligence.

Moreover, Arm boasts a 41% share in the automotive market, which is forecasted to expand by 16%. This growth outpaces the expected 6% growth in the mobile market, demonstrating the diversification potential.

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Arm Mulls Raising IPO Price Range amid Strong Investor Interest