Arm, the chip designer owned by SoftBank Group Corp (9984.T), received enough backing from investors to secure at least the top end of the price range in its initial public offering, which would command a $54.5 billion valuation on a fully diluted basis, a person familiar with the matter said on Tuesday.
Arm may price its IPO above the indicated price range and will decide on how much it will sell its shares for on Wednesday, that source and a second person with knowledge of the matter said. The shares are scheduled to start trading in New York on Thursday.
Arm was considering publishing a revised price range that would have been higher, reflecting the strong investor demand. It decided against such a move, adhering to its more conservative approach to marketing the offering, the sources said. Pricing the approximately $5 billion IPO conservatively raises the chances of the shares trading strongly at their debut on Thursday, the sources added.
The sources requested anonymity because the matter is confidential. Arm and SoftBank did not immediately respond to requests for comment.
The valuation that Arm has been seeking thus far represents a climb-down from the $64 billion valuation at which SoftBank last month acquired the 25% stake it did not already own in the company from the $100 billion Vision Fund it manages.
Yet even with this lower valuation, SoftBank would fare better than its $40 billion deal to sell Arm to Nvidia Corp (NVDA.O), which it abandoned last year amid opposition from antitrust regulators. SoftBank took Arm private in 2016 for $32 billion.
Arm has already signed up many of its major clients as cornerstone investors in its IPO, including Apple (AAPL.O), Nvidia, Alphabet (GOOGL.O), Advanced Micro Devices (AMD.O), Intel (INTC.O) and Samsung Electronics (005930.KS).
Weak mobile demand during a global economic slowdown has caused Arm's revenue to stagnate. Overall sales totaled $2.68 billion in the 12 months to the end of March, compared to $2.7 billion in the prior period.
Arm also told investors its royalty fees, which account for most of its revenue, were accumulating since it started collecting them in the early 1990s. Royalty revenue came in at $1.68 billion at the latest fiscal year, up from $1.56 billion a year before.
An area of scrutiny for investors has been Arm's exposure to China, given geopolitical tensions with the United States that have led to a race to secure chip supplies. Sales in China contributed 24.5% of Arm's $2.68 billion revenue in fiscal 2023.
