Arm Files Confidential IPO Request

The long-awaited initial public offering (IPO) of chip design giant Arm Holdings Ltd. seems imminent. But owner SoftBank will stay in control of the public company, and the scope of the offering is in question.

On Saturday, April 29, Arm announced that it has confidentially filed a draft registration to the U.S. Securities and Exchange Commission (SEC) to publicly list its shares. “The size and price range for the proposed offering have yet to be determined,” Arm stated in its press release.

Sources told Reuters that Arm plans to raise between $8 billion and $10 billion in the IPO, though nothing’s been officially acknowledged.

On Sunday, April 30, SoftBank made its own statement that clarified two things: First, SoftBank and SoftBank Vision Fund 1 will retain ownership of Arm post IPO. Second, SoftBank “does not expect that any such offering [of Arm shares] would have a material effect on its consolidated results or financial position.” As noted by an article in the Register, the lack of material consequence for SoftBank hints that a smaller-than-expected portion of Arm could be taken public.

Arm's Winding Path to IPO

Arm’s move hints that market conditions may be a bit more favorable to IPOs, which are reportedly down over 20%. Other reports hold that the size of this year’s upcoming IPOs will be reduced until macroeconomic conditions improve. That could add to speculation that the Arm IPO will be lower than the figures first anticipated – a possibility underscored by the anonymous statements to Reuters.

The road to Arm’s confidential filing has been rocky. It’s been over a year since SoftBank and NVIDIA (Nasdaq: NVDA) abandoned plans for a sale of Arm to NVIDIA in deal valued by some at $50 billion. In February 2022, NVIDIA relinquished $1.25 billion of a deposit paid to SoftBank as part of the dismantling of the deal.

The withdrawal followed a raft of objections from regulators and influential tech giants such as Alphabet (Nasdaq: GOOGL), Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Qualcomm (Nasdaq: QCOM), and Samsung. These and other companies depend heavily on Arm for chip designs, including ones for mobile phones and servers, and they feared a merger with NVIDIA would favor competitor NVIDIA and hinder their future plans.

Qualcomm was particularly vocal in opposing an NVIDIA buy, and at one point its CEO said Qualcomm would invest in Arm if the NVIDIA deal went south. Qualcomm did not respond to our request for comment on the recent developments.

Another Arm Obstacle in China

The Arm IPO announcement indicates that Arm and SoftBank have resolved another issue that was hindering the IPO: Arm’s China venture.

First, there was the issue of intractable CEO Allen Wu. Despite arrangements to replace him amid rumors of "conflict of interest," Wu refused to leave. Apparently, he finally stepped down, allowing Arm to proceed with the sale of its 48.2% stake in Arm China to an entity called Acetone Limited, which is reportedly owned by SoftBank's Vision Fund, on March 28, 2022.

Still there were roadblocks. As recently as March 2023, the Financial Times reported that officials in China continued to delay the final share sale of Arm’s stake in Arm China to Acetone. Chinese regulators apparently hoped to hold onto the valuable technology produced by Arm, citing chip losses from Western sanctions.

Now it appears that issue too may have been resolved. There is no confirmation of this, and Arm declined to respond, citing a mandated quiet period.

Despite questions about the size, scope, and related details of Arm’s IPO, one thing is clear: The company is on track to take a chunk of the company public. How that plays out, who will invest, and how much they’ll contribute could significantly affect the market for mobile and server chips worldwide.