Reality, whose unconditional influence on plans and intentions has a transformational effect in many cases, has changed the prospects for the public listing of Arm, a chip manufacturer that is part of the ownership structure of the Japanese corporation SoftBank Group.
The chip maker will start its roadshow this week. The mentioned breath of reality has lowered expectations about the company’s valuation and the amount that will be raised. The firm seeks to obtain investment funds in the amount of $5 billion to $7 billion. These plans are a significant reduction in the initial expectations associated with the receiving of investments worth $10 billion. The company’s valuation is likely to range from $50 billion to $60 billion. At the same time, the target range of this indicator was from $60 billion to $70 billion.
Strategic investors of the initial public offering of Arm shares were its largest customers, including Apple, Nvidia, Intel, and Samsung. According to experts, the success of the debut depends on how investors in a global context assess external factors, including risks in China, any increase in profits resulting from the introduction of artificial intelligence, and a slowdown in the growth of the smartphone market.
Astris Advisory analyst Kirk Boodry said that as part of the chip maker’s public listing, the most realistic goal is to raise funds in the range of $50 billion to $60 billion. According to expert, the prospectus reveal was less favorable due to a decrease in the company’s revenues and higher exposure to China compared to initial expectations.
Arm manages most of its Chinese business through an independent Arm China unit. This unit is the company’s largest customer, accounting for almost 25% of the fiscal year that ended in March. The firm’s revenue for the last fiscal year amounted to $2.68 billion. This indicator showed a decrease of about 1%.
The latest projected estimate would be a setback for SoftBank Group founder Masayoshi Son. The Japanese corporation bought a 25% stake in Arm from the Vision fund for $ 16.1 billion and valued the chip manufacturer at $64 billion. Kirk Boodry predicts that the value of this share will be from $12.5 billion to $15 billion. The expert noted that intra-corporate transactions are not actually a factor that contributes to the establishment of prices, and the prospectus states that pricing was determined by contractual conditions that existed earlier.
At the same time, the financial performance of the chip manufacturer may change during the roadshow this week before the start of the official Nasdaq listing next week. Bloomberg Intelligence analyst Sharon Chen says that a debut that does not meet expectations may have a factor of negative impact on the credit outlook of the Japanese corporation. According to her, the increase from $5 billion to $7 billion may not be enough to compensate for the purchase from Vision Fund 25% stake in Arm. She also noted that the deal could weaken the adjusted loan-to-value ratio of the corporation from 24% to 21%, while leverage may remain weak from the point of view of Moody’s requirement to assign a Ba3 rating.
As we have reported earlier, SoftBank Vision Fund Makes First Profit.