SoftBank Prepares for Blockbuster IPO of Chip Designer Arm with Nasdaq Agreement

Chip Designer Arm

SoftBank’s chief, Masayoshi Son, is expected to finalize an agreement with Nasdaq this week for the upcoming initial public offering (IPO) of chip designer Arm. Two insiders familiar with the matter revealed that SoftBank and the New York exchange reached a preliminary agreement on Monday, with Son anticipated to officially sign off on the deal later this week.

This significant development marks the first formal step in the IPO process for Arm as SoftBank progresses towards submitting the necessary filing documents. The IPO plans come after a failed attempt by SoftBank to sell Arm to competitor Nvidia in early 2022, leaving investors curious about the future plans for the Cambridge-based company.

Both SoftBank and Arm have refrained from commenting on the matter.

In recent months, Son has shifted his focus to the turnaround and public listing of Arm, stepping back from front-line management of SoftBank’s other investment activities. However, investors in the US, Japan, and the UK face challenges in accurately valuing Arm. Given the difficulty of direct comparisons with other companies and uncertainties surrounding Arm’s profitability, estimates for the company’s valuation range from as low as $30 billion to as high as $70 billion.

Previously, Goldman Sachs, JPMorgan, and Mizuho Securities were identified as potential candidates to oversee the IPO process for SoftBank. While these banks are expected to be involved, additional global investment banks are likely to be included in the final list.

The Nasdaq agreement, as currently envisioned, does not include plans for dual-listing Arm on another exchange. Efforts by the UK government, including Prime Minister Rishi Sunak, to secure a dual or secondary listing for Arm have been underway. However, the agreement with Nasdaq suggests a singular listing on the New York exchange.

For SoftBank, the success of Arm’s IPO is crucial in its efforts to engineer a turnaround, as the group is projected to report two consecutive years of losses in its upcoming financial results. To strengthen its balance sheet, the highly leveraged conglomerate has been selling shares in Chinese e-commerce group Alibaba. However, the valuation of SoftBank’s technology investments has been affected by the global tech market slump and rising interest rates.

Ahead of the IPO, Son has been focused on restructuring Arm’s business model to increase profitability. In a significant strategic shift, Arm has reportedly been considering raising prices for its chip designs, marking one of the most substantial changes to its business strategy in decades, according to a recent report in the Financial Times.

As SoftBank and Nasdaq finalize their agreement, the IPO process for Arm gains momentum, signaling a significant milestone for the chip designer and the potential for a blockbuster listing in the near future.