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Arm Holdings shares increased 10% in a most extensive initial public offering

September 18, 2023: On Thursday, the shares opened at $56.10 on the Nasdaq after being priced at $51. The offering price gave Arm a market value of $54.5 billion.

 In a press release, the company said it will start trading under the symbol “ARM.”

The U.K.-based company is listing nearly 95.5 million American depository shares on the Nasdaq, and SoftBank, its current owner, will control about 90% of the company’s outstanding shares.

The offering is at the shelter of Arm’s anticipated expense range of $47 to $51.

Arm said in its prospectus that revenue in its fiscal year that ended in March slipped less than 1% from the previous year to $2.68 billion. Net income in fiscal 2023 decreased 22% to $524 million.

Arm is riding the wave of excitement around artificial intelligence as it aims to crack open the tech IPO market after a nearly two-year pause. It’s set to be the most critical technology offering of the year.

Arm’s valuation for a chip company is exceedingly rich compared to any player in the market other than Nvidia. At $54 billion, Arm would carry a price-to-earnings multiple of about 104, based on profit in the latest fiscal year.

Nvidia is valued at 108 times earnings, but that’s after forecasting revenue growth of 170% for the current quarter, driven by AI chips. The Invesco PHLX Semiconductor ETF, designed to measure the performance of the 30 biggest U.S. chip companies, has a price-to-earnings ratio of about 25.

Many of Arm’s most important customers, including Apple, Google, Nvidia, Samsung, AMD, Intel, and Taiwan Semiconductor Manufacturing Company, said they would purchase shares as part of the offering. Arm’s technology is used in 99% of mobile processors worldwide.

Arm’s architecture outlines how a central processor works at its most basic level, such as doing arithmetic or accessing computer memory. The company was initially founded in 1990 to build chips for devices with batteries and took off when it started to be widely used in smartphone chips. Arm’s instruction set uses less power than Intel and AMD’s x86 architecture used in PC and server chips.

While some of Arm’s customers use the instruction set and design their CPUs, Arm also licenses entire designs to chipmakers they can use as CPU cores in their chips. Amazon uses Arm CPU designs in some of its server chips.

In a presentation to investors, Arm officials said the company has room to grow beyond smartphones and wants to design more chips for data centers and AI applications. It expects the total market for chip designs to be worth about $250 billion by 2025.

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