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Arm's IPO nears

As the financial world eagerly watches one of the most anticipated IPOs in the technology industry -- Arm Holdings, speculation is rife about its potential implications. Arm, a renowned semiconductor and software development company, is on the verge of entering a new phase that may redraw the map of technology industry investments and impact the industry as a whole. This analysis aims to name the key factors associated with the company's impending IPO and its broader implications within the technology sector.

About Arm Holdings

Arm Holdings, a globally recognized name in the technology industry, is a pioneering semiconductor and software development firm. Founded in 1990 and headquartered in Cambridge, England, Arm has played a key role in shaping the modern computing world. Its core business is the development of Arm processors (CPUs), which have become an integral part of a wide range of devices, from smartphones and tablets to embedded systems. Arm's revolutionary contribution extends beyond CPUs to include the development of advanced chips and software development tools. With a consistent approach to innovation, the company continues to push the technological boundaries and evolve the computing systems and devices that power our connected world.

One of the company's hallmarks is its focus on energy-efficient and energy-saving design. This approach makes Arm's processors particularly suitable for mobile devices where battery life and performance are critical factors. As a result, Arm-based processors have become a dominant force in the mobile and embedded systems market. In 2016, SoftBank Group took advantage of Arm's key market position and became the new owner of the company.

IPO will test SoftBank's AI

As chipmaker Arm, owned by SoftBank Group, prepares for an IPO on the US Nasdaq stock exchange, investors have two questions at once: will the company's growth be truly exponential, as SoftBank CEO Masayoshi Son claims, and will it be driven by the explosive growth of the artificial intelligence (AI) segment? Son has made Arm the centrepiece of SoftBank's technology investment portfolio, only underlining its key role in AI.  He sees Arm as a central part of a cluster of AI companies that create synergies with each other, suggesting that as much as 85% of SoftBank's assets are made up of foreign firms doing business in AI. Despite these claims, skeptics point out that in reality Arm may be a supporting rather than a major player in AI. Although the IPO is expected to provide more answers regarding SoftBank's overall AI strategy, analysts and experts remain cautious about Arm's real impact on the AI segment and the potential interplay within SoftBank's portfolio.[1]

Many large companies are interested in Arm

Arm Holdings is facing a dilemma as its major clients, including tech giants such as Apple, Amazon, Intel, Nvidia, Alphabet, Microsoft, Samsung Electronics and TSMC, vie for a piece of its upcoming initial public offering. This battle for IPO shares is a test of the company's commitment to remain independent within the chip industry. The interest in acquiring a stake in a company through an IPO stems from their intention to deepen business ties and prevent competitors from gaining an advantage in the market. Arm's semiconductors are a key commodity for more than 260 technology companies, producing more than 30 billion chips annually and powering a wide range of electronic devices. Even if the IPO investment does not give them any board seats or strategic control, it could strengthen their relationship with the company and thus thwart potential future acquisitions of the company by competitors. Arm and its owner, SoftBank Group, have set aside a total of 10% of the IPO shares for their technology clients, resisting pressure for higher allocations to maintain stock liquidity.[2] The news that nearly every major technology company is looking to acquire a stake in Arm's stock bodes well for Arm and SoftBank.

Overview of SoftBank shares

SoftBank's shares were floated on the Japanese Stock Exchange in January 2000 at a price of just under JPY 13,000. After coming to the market, there was a big jump of about 140%, but this was followed by an immediate drop. Since its fall, the stock has traded at around JPY 300. Only now, in the last few months, the price per share has climbed to JPY 6,600, but it is still almost 50% lower than at the beginning of trading.


Snímek obrazovky 2023-08-28 v 20.04.51

SoftBank's stock movement over the past five years. (Source: Google Finance) *Price is in Japanese yen. At the time of writing, the exchange rate was 1 USD = 145.59 JPY.

 Conclusion

As mentioned earlier, when you can attract the interest of such giants as Apple, Amazon and others, it is nothing but good news for both companies. We expect that if the IPO is successful, it could also have a positive impact on SoftBank stock itself.However, we will have to wait for some time to confirm our prediction -- until the IPO is officially announced. Nevertheless, both companies--Arm and SoftBank--seem extremely attractive with their plans and ideas for innovation.

Adam Austera, principal analyst at Ozios

* Past performance is no guarantee of future results

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[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate or based on the current economic environment, which may change. Such statements are not guarantees of future results. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

[1]  https://www.reuters.com/technology/arm-ipo-put-softbanks-ai-hard-sell-test-2023-08-21/

[2] https://www.investing.com/news/stock-market-news/analysisarms-clients-turn-ipo-into-tug-of-war-for-chip-influence-3158852

Disclaimer:

The material herein is considered as marketing communication under the relevant laws and regulations, and as such is not a subject to any prohibition on dealing ahead of the dissemination of investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and should not be construed as containing investment advice, or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. The published content is intended for educational/informational purposes only. It does not take into account readers’ financial situation, personal experience or investment objectives. APME FX Trading Europe Ltd makes no representation that the information provided is accurate, current or complete; and therefore, assumes no liability for any losses arising from investments based on the supplied content. The past performance is not a guarantee of future results.

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