Leidi.com Lei Jianping September 14
British chip design company Arm Holdings (stock code "ARM") was listed on Nasdaq in the United States today with an issue price of US$51, which is at the top end of the issuance range of US$47 to US$51.
ARM issued 95.5 million ADS shares in this issuance, raising US$4.87 billion. Based on this calculation, ARM’s market value is approximately US$54.5 billion.
AMD, Apple, Cadence Design Systems, Google, Intel, MediaTek, NVIDIA, Samsung Electronics, Synopsys, TSMC and other companies have expressed interest in becoming cornerstone investors and purchasing ARM shares in this IPO, with a maximum subscription of no more than $735 million.
In December 2021, software provider HashiCorp and Samsara, which develops cloud technology for industrial companies, went public. Since then, there have been few major technology company IPOs backed by venture capital.
This time, there is a restart phenomenon in US stock IPOs.
In addition to Arm's listing, fresh grocery delivery company Instacart, data and marketing automation company Klaviyo, shoe industry company "ugly shoe" Birkenstock, biopharmaceutical companies RayzeBio, and Neumora Therapeutics have also submitted prospectuses in preparation for listing on the U.S. stock market.
However, in the context of the Federal Reserve's aggressive interest rate hikes, market liquidity has been greatly affected. Whether it is Arm, Instacart or Klaviyo, it is difficult for valuations to reach ideal levels.
Arm has been listed in London and New York. The market value of this listing is lower than the 25% stake in Arm acquired by SoftBank from its investment arm Vision Fund, which was valued at $64 billion.
Before the IPO, SoftBank Group beneficially owned 100% of ARM's shares; after the IPO, SoftBank will own 90.6% of the shares. If the green shoe plan is exercised, SoftBank's shareholding will drop to 89.9%.
Even so, this listing has made ARM the largest IPO on the US stock market since 2023, and the largest IPO since Rivian went public in 2021.
Annual revenue of US$2.7 billion
Arm is a semiconductor intellectual property (IP) provider and one of the most important companies in the global technology field. 95% of the world's smartphones, including Apple iPhones and Android phones, use the Arm architecture.
Arm's fiscal year ends on March 31 of each year. The prospectus shows that Arm’s revenue in fiscal year 2021, fiscal year 2022, and fiscal year 2023 will be US$2.027 billion, US$2.7 billion, and US$2.679 billion respectively; gross profits will be US$1.882 billion, US$2.572 billion, and US$2.573 billion respectively.
Arm's operating profits in fiscal year 2021, fiscal year 2022, and fiscal year 2023 are US$239 million, US$633 million, and US$671 million respectively; net profits are US$388 million, US$549 million, and US$524 million respectively.
Arm's revenue in the second quarter of 2023 was US$692 million, compared with US$675 million in the same period last year; gross profit was US$667 million, compared with US$644 million in the same period last year; operating profit was US$294 million, compared with US$644 million in the same period last year. Operating profit for the same period was US$111 million; net profit was US$225 million, compared with US$105 million for the same period last year.
China is Arm's largest overseas market. In fiscal year 2022 and fiscal year 2023, Arm China (Arm China) accounted for 18% and 24% of Arm's total revenue respectively.
Almost all of ARM's revenue in China comes from ARM China.
In 2020, there was an internal fight in Arm Technology - the board of directors of Arm China's joint venture company, Arm Technology, voted 7:1 in favor of removing Wu Xiong'ang, and Arm Technology's "coaching change drama" kicked off. , In the end, Nvidia's acquisition of Arm ended in failure in 2022. Arm Technology announced that co-CEOs Dr. Liu Renchen and Dr. Chen Xun took over, and the two took over Arm Technology's business operations. Only then did the turmoil come to an end.
Arm CFO specifically mentioned the importance of the Chinese market and its cooperative relationship with Arm China during the roadshow. According to him, the relationship between ARM and Arm China is that ARM provides technology, and Arm China returns 90% of ARM’s profits in China. revenue.
Arm is not in a position to take advantage of AI
AI has been booming since 2023, and NVIDIA is the biggest beneficiary. To some extent, Arm can catch up with NVIDIA. For example, the NVIDIA chip GH200 includes a CPU based on the Arm architecture.
However, some analysts believe that “not all Nvidia GPUs must be sold with Arm CPUs, they just happen to provide super chips that combine the two.”
Arm isn't at the center of the AI craze, either. An analyst said, “What’s exciting about the current wave is software and platforms. OpenAI has launched tools that can use large language models to produce content (AIGC). Arm has nothing to do with this.”
SoftBank is the largest shareholder
SoftBank acquired Arm in 2016 for 24 billion pounds (about 31 billion U.S. dollars).
In 2020, SoftBank had planned to sell ARM to Nvidia for US$40 billion. However, because Arm is the world’s largest smartphone chip IP design supplier, mobile phone chips manufactured by Apple, Qualcomm, Samsung and other companies all use the ARM architecture. The final sale plan fell through due to regulatory objections.
Since 2022, with the collapse of global technology stocks and the depreciation of the yen, the investment returns of SoftBank Vision Fund have deteriorated, especially investments in Wework, encryption startup FTX and other companies have suffered waterloo, which has seriously damaged the image of SoftBank founder Masayoshi Son.
After SoftBank recorded its largest single-quarter loss since the company was founded, its liquidity needs increased and it sold various assets on a large scale. Alibaba has become SoftBank’s “cash machine”.
In 2022, in order to meet liquidity needs, SoftBank Group will sell 9% of Alibaba shares. In February 2023, Alibaba announced that SoftBank's Alibaba shares had fallen below the 15% threshold required to nominate the company's directors, thus losing its seat on Alibaba's board of directors.
Since then, SoftBank has been seeking to promote Arm’s listing. In a sign of Arm's importance to SoftBank's portfolio, SoftBank invited Arm CEO Rene Haas to join its board of directors in April.
With the listing of Arm this time, Masayoshi Son has also made a small turnaround.
The following is part of the Arm roadshow PPT (edited by Leidi.com):
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