Why SoftBank IPO Is Anticipated To Be The Biggest IPO Of 2023 – A Tale Of Opportunities And Hurdles!
SoftBank has been pursuing a listing for Arm since its proposal to sell the chip designer to Nvidia Corp for $40 billion fell through last year due to antitrust concerns raised by US and European authorities.
Since Russia occupied Ukraine in February 2022, the IPO market has been plunging. Since then, investors have hesitated to invest in new listings, fearing that growing geopolitical manoeuvrings may destabilise global markets. But that hesitancy could change dramatically later this year. According to sources, rockstar chipmaker Arm is “confidentially submitting paperwork” for an IPO.
SoftBank Group Corp’s chipmaker Arm Ltd has filed confidentially with authorities for a U.S. stock market listing, paving the way for this year’s most extensive IPO. The IPO registration indicates that Softbank is proceeding with the blockbuster offering despite dire market circumstances after announcing the prior month that it wanted to float Arm on the New York Stock Exchange.
According to sources, U.S. IPOs, excluding listings for special purpose corporations, are down approximately 22% year to date, totalling just $2.35 bn, as stock market volatility and economic uncertainties discourage many IPO aspirants. Arm intends to sell its shares later this year to raise between $8 billion and $10 billion. The size and pricing range of the anticipated IPO has yet to be finalised. The sources emphasised that the actual timing and magnitude of the IPO are subject to market circumstances and requested anonymity because the topic is private.
Earlier attempts for Softbank IPO.
SoftBank has been pursuing a listing for Arm since its proposal to sell the chip designer to Nvidia Corp for $40 billion fell through last year due to antitrust concerns raised by US and European authorities. Arm’s business has performed better than the overall semiconductor industry since then, owing to its concentration on data centre servers and personal PCs, which earn bigger royalty payments. Sales increased by 28% in the most recent quarter, according to the corporation.
The IPO of Arm is likely to bolster SoftBank’s fortunes, which is struggling to turn around its massive Vision Fund, which has suffered losses owing to the dropping prices of several of its investment in technology businesses. Earlier this year, Arm rejected a British government effort to list its shares in London instead of floating on a U.S. market.
Goldman Sachs Group Inc, JPMorgan Chase & Co, Barclays, and Mizuho Financial Group are leading Arm’s IPO preparations.
SoftBank’s Arm would be one of the largest IPOs in the United States in the recent decade, based on the reported amount of the listing. According to Bloomberg, bankers offered a valuation of $30 billion to $70 billion for the offering, a significant range highlighting the difficulties of valuing the business against unexpected semiconductor share markets.
What is Arm famous for?
The company’s primary product is semiconductors. It manufactures computer chips that are used in a wide range of applications. If you have a smartphone or laptop, chances are it contains an Arm chip or a chip based on Arm’s architecture. However, Arm chips can be found in various other electronic devices, from supercomputers to smartwatches. In other words, Arm chips and technology are crucial for most of the gadgets we use in our daily lives and at work.
Is there any dilemma in the timing of the IPO?
The stock exchange debut of SoftBank’s Arm in 2023 is expected to be one of the year’s outstanding IPOs – but the timing for a spectacular public market launch couldn’t be worse.
The chip industry is in disarray.
Arm’s difficulty with going public in 2023 is the health of the semiconductor industry, which is in decline. Chip stocks, in particular, took a beating in 2022, as supply-chain constraints and shortages caused by the Covid-19 epidemic persisted throughout the year, with only a slight respite for the sector’s major firms this year.
Many people are still suffering. In January, South Korean conglomerate Samsung stated that its operating earnings plummeted by about 70% in the fourth quarter due to weaker semiconductor demand caused by lower consumer spending on gadgets and a chip glut.
Meanwhile, Nvidia has seen its shares fall as a result of new licence requirements implemented by the US government. The business warned in an SEC filing that the licences would have a $400 million impact on sales to China in the third quarter of last year. This compelled SoftBank to reposition Arm for public markets, as the Japanese conglomerate aims to earn profits from assets that may balance losses in its venture capital operation.
Arm has already been hampered by such export limits, as it was revealed last month that Alibaba was unable to purchase chip designs from the British business due to concerns that a licence to sell high-performance designs to the Chinese tech giant would not be authorised. Such occurrences are likely to frighten will be public investors in Arm at a tempo when they are tightening their belts.
There are some indications that Arm will be immune to some of the market turmoil: for example, its expanding concentration on the automotive industry has seen revenue for its automotive segment more than quadruple since 2020 – a rare case of sustained demand, according to the Financial Times.
However, with chip revenue expected to fall by nearly 4% in 2023 to $596 billion, according to Gartner projections, it is difficult not to believe that any Arm IPO would simply throw the company into perilous waters.
The UK chip manufacturer, purchased by SoftBank for $32 billion in 2016, has returned to the public markets in 2023 by the Japanese conglomerate’s CEO Masayoshi Son in the middle of one of the most severe market downturns in current decades. UK Prime Minister Rishi Sunak increased efforts in December for a dual-listing including London, complicating Arm’s re-listing. This sparked a tug-of-war with the US over a corporation seen as the crown jewel of UK technology.
Conclusion.
But it’s a battle whose result is likely to be in vain for SoftBank’s Arm, the chipmaker behind proprietary designs found in the world’s leading smartphones and automobiles, with its fortunes becoming even more uncertain in an uncertain future. SoftBank’s plan to list Arm (to support its own balance sheet issues) in 2023 may be more contentious than necessary due to dwindling investor enthusiasm for speculative tech businesses and a devastating collapse in the semiconductor sector.
