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Shares in UK chip designer Arm are expected to be priced above the initial range at as much as $52 per share, which would give the company a valuation of nearly $54bn, according to three people involved in the initial public offering.
Arm and its parent company SoftBank will officially price its shares with underwriters later on Wednesday, with trading set to begin on Thursday on the Nasdaq exchange. These people cautioned that pricing could still change ahead of the final decision.
The people said that the IPO price is expected to be set above the prior range of $47-51 a share due to high demand that resulted in its stock being more than five times oversubscribed.
The listing has been watched closely as a barometer for new tech IPOs. It is the largest IPO in two years, since electric-truck maker Rivian debuted in 2021, raising about $12bn. Tech valuations have slumped from their coronavirus pandemic-era highs in the past 18 months amid economic uncertainty and rising interest rates.
A $52-per-share price tag would value Arm at about $53.9bn by market capitalisation, and raise approximately $5bn for SoftBank, which has offered 9.4 per cent of the company’s stock.
Arm declined to comment ahead of the pricing decision.
A series of big tech customers of Arm’s chip designs, including Apple, Google, Nvidia, Samsung, Intel and TSMC, are expected to purchase $735mn worth of Arm shares at the IPO price.
The banks underwriting the listing closed orders for shares on Tuesday, a day earlier than planned. Goldman Sachs, JPMorgan and BofA Securities are among a 28-strong army of banks selling the Arm IPO.
High demand has helped to crack open a window for tech listings in the US after a dearth of deals this year.
On Monday, the San Francisco-based ecommerce company Instacart announced the price range for an IPO that would raise up to $616mn. On a fully diluted basis the IPO would value Instacart at up to $9.3bn, less than a quarter of its private valuation two years ago.
Marketing automation company Klaviyo also announced its IPO pricing on Monday. It said it would sell 19.2mn shares at a range of $25 to $27 a share. This would value the company at up to $6.3bn. It was last valued by venture capitalists at $9.5bn.
SoftBank paid $32bn to acquire Arm in 2016, but the IPO price is set to be below the $64bn valuation implied less than a month ago in a transaction with its own Vision Fund, the $100bn Saudi-backed investment vehicle the Japanese company manages.
Arm’s core market of smartphone chips has stagnated this year, but it is hoping for growth from artificial intelligence and data centre customers, despite playing only a peripheral role in the technology required to build the kinds of large language models that power ChatGPT and other generative AI systems.
SoftBank originally hoped the deal would value Arm at as much as $70bn. However, it reported flat sales in its latest financial year, and investors have expressed concerns about a drop in profits in the past quarter and the company’s exposure to multiple risks in China.