(Boursier.com) — arm should “price” its IPO “at the high end of the range or higher,” Bloomberg confirms, citing people familiar with the matter. SoftBank, which controls the chip designer, has reportedly decided with its advisors to set the IPO price at a minimum of $51 at the top of the range, or even $52 or more. The final price setting is expected today, while the start of trading on Nasdaq will take place tomorrow. Bloomberg specifies that the deal is already oversubscribed more than 10 times, while bankers stopped taking orders yesterday. Arm had previously set an indicative IPO range of $47 to $51 per share, representing a valuation of $54.5 billion at the top of the range. Reuters reported earlier yesterday that Arm would only agree to a transaction at or above the high end of its range. The agency cited people familiar with the matter.
In any case, Arm would not offer more securities, taking into account that SoftBank intends to retain 90.6% of the capital. Arm was previously expected to sell nearly $5 billion worth of securities. Depending on the price that is ultimately decided, the operation could therefore exceed this amount. A decision on a possible increase in the IPO range is expected today.
Note, however, that the final valuation should not exceed the $64 billion reached last month, when SoftBank bought the 25% not held in the company from the Vision Fund that it manages. It should nevertheless come out much higher than the 40 billion dollars of the aborted deal with Nvidia – which had raised antitrust concerns.
Arm has attracted several of its major customers as key investors in its IPO, including Apple, Nvidia, Alphabet, Advanced Micro Devices, Intel and Samsung Electronics. Weak mobile demand during a downturn led to stagnant revenue for Arm, with overall sales of $2.68 billion in the 12 months ending at the end of March, compared with $2.7 billion in the previous period . Still, Arm told potential investors in New York on Thursday that the cloud computing market, of which it has only a 10% share, is expected to grow at an annual rate of 17% through 2025, with AI notably. The automobile market is expected to grow by 16%. Arm also told investors that its royalties were piling up. Royalty revenues totaled $1.68 billion in the last fiscal year, up from $1.56 billion a year earlier.
Bloomberg also cites investors, who refused to be identified, according to whom the general director of Arm, Rene Haas, also underlined the strong impact of price increases. Haas would envisage continued robust growth in the 2026 financial year, with growth ‘in the high tens’ (around 16 to 19%). In terms of margins, adjusted operating profitability, of 29% for the closed financial year, should increase to around 40% in the first quarter and even 60% (!) in the long term according to presentation elements. The long-term Ebitda margin could reach 65%, according to the presentations… Forecasts which may seem very optimistic.
Note also that Instacart, a food delivery service, would aim for a valuation of $8.6 to $9.3 billion as part of its IPO also expected soon, according to a source familiar with the issue of Reuters agency. This data was initially revealed by the Wall Street Journal. That would be a big drop from Instacart’s $39 billion valuation in 2021, amid the pandemic. The group also intends to list on Wall Street in September, but would proceed by direct listing. For the half-year ended at the end of June, the group revealed last month revenues up 31% to $1.48 billion, as well as a net profit of $242 million compared to a loss a year before.