Arm Goes The Distance

Arm Goes The Distance

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  • The banks overseeing Arm's $50 billion IPO have decided to close share orders a day earlier than originally planned due to robust demand, marking the largest initial public offering in nearly two years. The IPO for the UK-based chip designer, which is significantly oversubscribed, will now conclude on Tuesday instead of Wednesday as initially scheduled. Although shares in Arm are expected to be priced on Wednesday, they may land at the upper end of the initial price range of $47 to $51 per share, or even higher. At the highest point of this range, the IPO would raise $4.9 billion for Arm's parent company, SoftBank, and value Arm at $54.5 billion on a fully diluted basis, although the final price is yet to be determined.
  • This development underscores the strong investor demand for Arm's listing, helping to revitalize the market for IPOs in the United States, which had seen a shortage of such deals earlier this year. Notably, Instacart, a San Francisco-based ecommerce company, announced its IPO price range, aiming to raise up to $616 million, while Klaviyo, a marketing automation firm, also revealed its IPO pricing.

Why it matters

Arm, with its dominant presence in the mobile device market, boasts a significant market share, accounting for over 99% of the smartphone market. However, it trails behind in the rapidly expanding cloud computing sector, holding a modest 7% market share. The company's revenue is derived from royalties (63%) and licensing (37%). Royalties entail receiving a payment per chip sold, while licensing provides customers access to Arm's intellectual property to develop Arm-based processors.


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