Arm Holdings has fired the starting gun for an initial public offering (IPO) on America’s Nasdaq exchange.
The British computer chip designer’s decision to shun a listing within its home market was not unexpected, but the confirmation still comes as a blow to the London Stock Exchange.
Cambridge-based Arm has long been considered a shining example of a British company achieving global success. It is a rare case of a UK firm excelling in the tech sector, which is dominated by US companies.
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Arm is currently owned by Japanese investment group Softbank, which acquired it in 2016 for $32bn (£25bn). The market cap will be determined by the IPO book-building process, but estimates have its current value in excess of $70bn (£55bn).
The company’s computer chips and software platforms power most of the world’s smartphones and are deeply embedded in the fast-rising AI sector, so there is expected to be strong demand from investors.
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US tech sector heavyweights such as GPU maker Nvidia are likely to be vying with other investors for a major stake in the company.
Being a foreign company, Arm will issue American depositary shares (ADS) rather than conventional shares. The deal timeline is yet to be confirmed but the transaction is expected sometime in September.
AJ Bell investment director Russ Mould sees the decision as a reflection of the valuation ambitions SoftBank has, rather than a broad indictment of the London Stock Exchange.
“London is still the subject of criticism, from the polite to the downright rude, that it is not attracting enough deals and that it is not doing so in the ‘right’ sectors, such as technology, to leave the UK market looking a little lop-sided towards banks, oils, miners, insurance and more defensive sectors like food, beverages, tobacco and utilities,” he said. “This has not been seen as a virtue for much of the past decade or more.
“Softbank’s decision to list ARM in New York will therefore be seen by many as a blow to London’s prestige, even if the choice is likely to be one driven by the valuation sought by the seller rather than any strong views either way on London’s governance regime or other issues.
“The US market’s current valuation premium relative to London exceeds historic averages and Softbank will be looking to show it can still make successful investments after a string of embarrassing duds, most notably WeWork and FTX,” Mould continued.
“Masayoshi Son will be out to prove that Softbank’s track record is a good one and not one that rests on an initial investment in Alibaba many years ago, the sort of one-off strike that some may be tempted to put down to luck as much as judgement. As such, going for the more highly-rated US market makes sense, as does the greater number of semiconductor industry stocks that can help to provide a valuation benchmark.”
Raine Securities is acting as adviser to Arm, while Barclays, Goldman Sachs, J.P. Morgan, and Mizuho are joint book-runners for the proposed offering.
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