Apple and Nvidia to become strategic investors in Arm's US IPO

SoftBank arranged for Apple, Nvidia, and Intel to be strategic investors in Arm's US IPO on Friday, September 1. Among the shareholders are also Samsung, AMD, and Google. Each investor may subscribe for up to $100 million worth of Arm shares. Apple and Nvidia are two of Arm's most important clients.

SoftBank has been in discussion with Arm's customers and partners for months, but the finalisation of these plans has only just occurred. However, the specifics may alter as the company approaches its IPO. Next week, Arm is expected to host an investor roadshow.

According to sources familiar with the situation, each of these investors will invest between $25 million and $100 million.

Arm expects to raise between $5 billion and $7 billion through its IPO, which will be promoted with the assistance of well-known companies in the technology industry. In 2016, SoftBank acquired Arm. ARM was previously valued between US$60 billion and US$70 billion, but the IPO valuation may be between US$50 billion and US$60 billion, according to media reports.

Arm is contemplating pricing its shares on September 13, with trading scheduled to commence the following day.

Arm is a British corporation whose designs nearly monopolise the core chips of all smartphones, holding over 99% of the market share. Arm estimated in its prospectus that approximately 70% of the global population utilises products containing Arm chips. Last year, Arm-based chips accounted for 49 percent of a market worth more than $200 billion.

In fiscal years 2021, 2022, and 2023, Arm's annual revenue is $2.027 billion, $2.703 billion, and $2.679 billion; net profits are $388 million, $549 million, and $524 million; and R&D expenses account for the same periods. 40%, 37%, and 42% of annual revenue; gross profit is 93%, 95%, and 96% of total revenue, accordingly.

In addition, Arm's quarterly revenue decreased 2.5% year-over-year to $675 million in the most recent quarter ended June 30, and net profit decreased to US$105 million from US$225 million in the prior fiscal year, a decrease of more than half.

In terms of customer concentration, the top five customers accounted for 57% of the company's total revenue in fiscal year 2023, while the top three customers accounted for 44%. The largest customer accounted for 24% of total revenue, the second largest customer for 11% of total revenue, and the third largest customer for 9% of total revenue.

Arm has a dramatic origin story. It has a brief past. It was established in 1990 and is therefore only 33 years old. When it was listed on the London Stock Exchange and Nasdaq between 1998 and 2016, its "star" characteristics were inferior to what they are today. In 2016, when the United Kingdom "Brexit", many star shareholders sold Arm to SoftBank of Japan, which is targeting the technology market, with permission from the British government. Arm will acquire mobile phones and microprocessors as a result of this transaction.