SoftBank’s Arm Targets $60 Billion Value In September IPO

(Bloomberg) -- SoftBank Group Corp.'s semiconductor unit Arm Ltd. is targeting an initial public offering at a valuation of between $60 billion and $70 billion as soon as September, a sign of bullish interest in artificial-intelligence chips, according to people familiar with the matter. 

The roadshow is scheduled to start the first week of September with pricing for the IPO the following week, said one of the people, asking not to be named because the talks are private. The latest target for Arm's valuation underscores a shift in market mood in favor of technologies linked to generative AI and chips. Earlier this year, bankers were pitching a range of valuations for the chip designer from $30 billion to $70 billion, Bloomberg News has reported. 

SoftBank, led by Masayoshi Son, and Arm Chief Executive Officer Rene Haas long considered the bottom of that range too low. Arm executives may still be gunning for a valuation of as high as $80 billion, but the odds of achieving such a target are uncertain, one of the people said. 

Arm has “had a hugely important but behind-the-scenes and not-very-well-understood role for a very long time,” said Bob O'Donnell, president of TECHnalysis Research. “There's this raised awareness now of what Arm does and the role that it plays.”

The chip company is looking to raise as much as $10 billion in the IPO, Bloomberg News has reported. At the top end, Arm's debut should be the largest from the tech industry since Alibaba Group Holding Ltd. in 2014 and Meta Platforms Inc. (then Facebook Inc.) in 2012. It lands during a dry stretch for IPOs, given global economic uncertainty and the war in Ukraine.

SoftBank and Arm declined to comment. SoftBank shares fell 3.7%, as the benchmark Nikkei index slid 2.3%.

Arm made a confidential filing for a US listing in April. A handful of big industry names, including Nvidia Corp. and Intel Corp., have been engaged in preliminary talks to become anchor investors in the IPO, which could be the year's biggest market debut. 

Goldman Sachs Group Inc., JPMorgan Chase & Co., Barclays Plc and Mizuho Financial Group Inc. were named as IPO banks in the filing, Bloomberg News has reported. 

While the Cambridge, UK-based company's technology is used in almost every smartphone on the planet, its place in the industry has long been obscure. Arm sells the blueprints needed to design microprocessors, and licenses technology known as instruction sets that dictate how software programs communicate with those chips. The power efficiency of Arm's technology helped make it ubiquitous on phones, where battery life is critical.

Haas, who took over as CEO last year, is now working to expand beyond the smartphone market, which has stagnated in recent years. He's targeting more advanced computing, particularly the chips for data centers for cloud computing and artificial intelligence applications. 

Processors for that market are among the most expensive — and profitable — in the industry. Amazon.com Inc. has adopted Arm-based chips for its Amazon Web Services because it says they are more efficient both in terms of energy and economics. They are used by 40,000 AWS customers. 

Estimates for Arm's value have fluctuated wildly in tandem with chip stocks since SoftBank acquired the company for $32 billion in 2016, de-listing it from the London Stock Exchange. SoftBank founder Son has regularly talked up the potential for Arm's future growth and dominance in chip IP. In February last year, Son said he wants Arm's debut to be “the biggest” in the history of the semiconductor industry.

A successful Arm IPO would mark a rare victory for SoftBank, which struggled after an ill-fated foray into startup investing. The company's Vision Fund arm lost 6.9 trillion yen ($48 billion) in the last two fiscal years as the value of its holdings tumbled.

--With assistance from Edwin Chan.

(Updates with IPO context from fifth paragraph)

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