(BFM Bourse) – Seven years after its takeover by SoftBank, present in internet access and telephony services, the British Arm will make its return to the Stock Exchange. The Japanese conglomerate is counting on this operation, considered the biggest IPO of the year on Wall Street, to rebuild its health.
With the IPO of Arm, its owner, the Japanese SoftBank Group and its fanciful boss Masayoshi Son, are hoping for a coup capable of restoring their own image after often disastrous investments in recent years. But this scenario is not guaranteed.
The British microprocessor champion is targeting a market valuation of up to $52 billion and plans to raise between $4.5 billion and $5.2 billion when it debuts on the New York Stock Exchange, according to preliminary documents published Tuesday.
It should thus be the largest initial public offering (IPO) of the year on Wall Street and even in the world, and one of the most important in the technology sector since that of Alibaba in New York in 2014.
But its size promises to be significantly smaller than what Masayoshi Son initially hoped for by presenting Arm as a future major player in artificial intelligence, a field that is whetting investors’ appetites.
Which already provoked some harsh comments from analysts: “Arm’s IPO risks being a damp squib since all signs indicate that (the company, editor’s note) has a much lower exposure to AI than this that Mr. Son was trumpeting”, tackled Amir Anvarzadeh in a note from Asymmetric Advisors.
Monstrous losses for SoftBank
Equally embarrassing is the comparison with a recent internal transaction led by SoftBank Group: its purchase of the 25% stake in Arm held by its Vision Fund unit, at a price amounting to a valuation of $64 billion for the British company .
SoftBank did not specify why this costly operation was necessary just before the IPO. Some analysts suspect that the Japanese group was obliged to offer a large bonus to reward other important shareholders of the Vision Fund.
SoftBank bought Arm in 2016 for $32 billion and decided in early 2022 to reintroduce this company on the stock market, after the failure of a lucrative sale to the American Nvidia due to regulatory obstacles that were too high.
This is one of the few positive prospects that SoftBank has clung to in recent months. Because the group has regularly suffered monstrous losses since its 2019/2020 financial year, after the collapse of its investments in global tech.
Masayoshi Son has been skipping SoftBank’s earnings presentation since the start of this year. The CEO-founder used to make it a platform where he announced a bright future for his group, and even for all of humanity, thanks to new technologies. All interspersed with candid slides, like a goose laying golden eggs, or unicorns spanning a “coronavirus valley”.
A tech visionary
However, there was a time, not so long ago, when Masayoshi Son had the reputation of being a tech visionary. Was he not the first, in 2000, to believe in a certain Chinese entrepreneur named Jack Ma and to invest 20 million dollars in his start-up Alibaba?
One of the jackpots of the century: 20 years later, SoftBank Group’s stake in the Chinese e-commerce giant was worth more than $200 billion.
Crowned with this and other business successes, Mr. Son was able to attract the sovereign funds of Saudi Arabia and Abu Dhabi to set up the Vision Fund in 2017, the largest private equity fund in tech ( more than 100 billion dollars), led by SoftBank Group.
But the tide began to turn in 2019 with the debacle of WeWork, the American shared office giant, in which SoftBank Group and the Vision Fund had invested heavily. Saved at great expense by SoftBank at the time, WeWork remains moribund: the company announced in early August that it was once again on the verge of bankruptcy.
SoftBank Group then suffered from the hard landing of the financial markets linked to the drastic monetary tightening in the United States against inflation and the takeover of the technology sector in China by Beijing. To bail out, the group was forced to monetize and then sell almost all of its Alibaba shares.
SoftBank could well adopt the same strategy with Arm, of which it plans for the moment to list only approximately 10% of the capital. “In the long term, I think Arm will become a tool to finance investments in other unlisted technology companies,” David Gibson, an analyst at MST Financial, told AFP.
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