The who’s who of Big Tech is lining up to invest in what could be one of the year’s most extensive initial public offerings. On Tuesday, British chip designer Arm Holdings Ltd launched the roadshow for its blockbuster IPO, which is expected to value at as much as $52 billion in this year’s biggest share sale. Arm kicked off its roadshow in Baltimore, where influential asset manager T Rowe Price is headquartered. The fund manager is known for critical investments in several significant IPOs recently, including electric car maker Rivian Automotive Inc’s float last year.
The company’s prospectus says chips designed by Arm are already in 64 percent of the world’s Internet of Things-enabled goods, including washing machines, thermostats, digital cameras, and drones. It also claims to be in some manufacturing equipment, robotics, and smart city infrastructure like streetlights and traffic signals. The prospectus, however, also warns of a competitive threat from other companies developing open-source designs and alternative microprocessor architectures such as RISC-V.
Investors in Arm will focus on its ability to diversify beyond its low-power chip designs for mobile devices, which have been its mainstay in recent years. Chief Executive Officer Rene Haas has pushed the company to expand into data centers and artificial intelligence, where it can ride demand for fast-growing technologies requiring energy-efficient central processing units. Those efforts may help the company avoid the fate of other high-growth tech firms that have debuted with lofty valuations and plummeted below their list price.
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In his presentation, Haas emphasized the company’s track record of profitability and a focus on investing for the long term rather than trying to hit short-term growth targets. He noted that the firm has returned $1.6 billion to shareholders since its founding in 1989 and said he speaks to SoftBank Group Chairman Son a few times a week.
Unlike some loss-making, venture-backed tech companies that have hit the markets in recent years, Arm is profitable and will not have to compete for money with investors, which could ease concerns over a potential valuation bubble. It has tapped 28 banks to underwrite the IPO, including Barclays PLC, Goldman Sachs Group Inc (GS.N) and JPMorgan Chase & Co (JPM.N).
The IPO’s timing is sensitive as it comes amid weakening global economic demand that has weighed on semiconductor sales and a deep freeze in the public stock market that was exacerbated by interest rate hike fears and a brutal selloff last year. A successful listing by Arm could boost the market and open the way for other companies like Instacart Inc (INSK.O) and Reddit Inc. to follow suit with their IPOs in 2022. But if the offering stumbles, it could further delay the IPO wave and prolong the pause plaguing the sector this year.