The chip designer Arm will begin trading on Thursday, September 14th, on the Nasdaq stock exchange in New York under the code (NASDAQ:ARM), following a highly successful stock offering that secured a valuation of $54.5 billion, at the top of its target range.

This represents a good outcome for Japanese owner SoftBank.

Last year, the company planned to sell Arm to chip manufacturer Nvidia for just $40 billion.

It abandoned the deal amid opposition from competition regulators.

Instead, it retained control and has already raised nearly $5 billion through the IPO – the largest of the year.

The success of the sale was in doubt after Arm attracted a roster of renowned investors.

Among those who bought in were chip giants Intel and AMD, consumer titans like Apple and Samsung, and Google’s parent company, Alphabet.

Some investors have doubts, pointing to weak demand for smartphones – the primary market for Arm chips.

But the company asserts that it anticipates strong growth in other sectors, including cloud computing and automobiles.

Softbank resisted the temptation for more by accepting $4.8 billion with Arm’s IPO

SoftBank Group Corp. fulfilled its ambitions for Arm Holdings Plc by raising $4.87 billion in the year’s largest initial public offering, resisting the temptation to raise more money.

When setting the IPO price, Masayoshi Son, SoftBank’s founder, chairman, and CEO, signaled that he was not willing to undermine that demand, even if it meant leaving money on the table.

Son’s approach to the IPO reflects his long and ongoing bet on Arm, whose chips are found in most of the world’s smartphones. Arm is also set to benefit from the rampant rush towards artificial intelligence chips and generative AI – a shift in the industry that helped give Nvidia Corp. a market value of more than $1.1 trillion.

Founded in 1990 as a joint venture between Acorn Computers, VLSI Technology, and then-Apple Computer Inc., Arm was listed on the London Stock Exchange and Nasdaq from 1998 to 2016 when SoftBank acquired the company for $32 billion.

In 2020, SoftBank tried and failed to sell Arm to Nvidia for $40 billion. That move upset Arm customers who did not want to see the company, which provides the fundamental technology used by the mobile phone industry, fall into the hands of a single buyer.

IPO Pivot

With the deal off the table, Arm turned to an initial public offering (IPO), where it aimed to be valued between $60 billion and $70 billion, according to Bloomberg News.

While Arm’s previous goal was to raise $8 billion to $10 billion in the listing, that target was lowered, at least in part because SoftBank decided to buy out the roughly 25% stake held by its Vision Fund in a transaction that valued Arm at over $64 billion, based on Arm’s records.

SoftBank also decided to retain a larger portion of Arm’s shares, leaving only 10% of them for investors, including some of Arm’s largest customers. As part of the IPO, Arm set aside more than $700 million worth of shares for Intel Corp., Apple Inc., Nvidia Corp., Samsung Electronics Co., and Taiwan Semiconductor Manufacturing Co.

Underwriters have the option to purchase up to 7 million additional shares.

The IPO in question is the world’s largest this year, surpassing the $4.37 billion listing by Kenvue Inc., a Johnson & Johnson subsidiary focused on consumer health. Arm’s offering may also serve as a catalyst for IPOs by dozens of tech startups and other firms whose plans to go public in the US were put on hold during the deepest and longest bear market since the 2009 financial crisis.

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Arm’s listing is the largest in the US since electric vehicle manufacturer Rivian Automotive Inc.’s $13.7 billion offering in October 2021. It is also set to rank among the largest in the technology sector of all time, though still well below the two largest: Alibaba Group Holding Ltd.’s $25 billion offering in 2014 and Meta Platforms Inc.’s $16 billion debut in 2012, then Facebook Inc.

While Arm’s technology is used in nearly every smartphone, it is not widely known among consumers. Arm sells the designs necessary to create microprocessors and licenses the technology known as instruction sets that determine how software programs communicate with these chips. The energy efficiency of Arm’s technology has helped make it ubiquitous in phones, where battery life is critical.

Chips Slump

The frenzy around AI has driven a rise in chip stocks this year, lifting the Philadelphia Semiconductor Index by 41%. However, the chip sector overall is still facing a sales slump, exacerbated by an oversupply.

Arm’s revenue fell about 1% to $2.68 billion in the fiscal year ended March 31, according to its records. The company’s net profit, which jumped to $549 million in the fiscal year 2022 from $388 million the previous year, fell this year to $524 million.

Barclays Plc, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Mizuho Financial Group Inc. are leading the Arm offering. Raine Securities LLC, which is backed by SoftBank, is also acting as a financial advisor for the IPO.