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September 2023
AAM Magazine
September 2023
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PE Panorama: SoftBank banks on Arm

By Paul Mackintosh   
May 8, 2023

SoftBank Group’s marquee asset Arm, a UK chip designer, has long been held out as the potential remedy to the Japanese company’s travails. The planned merger of Arm with Nvidia could have netted up to US$40 billion before it was nixed on competitiveness concerns in February 2022.

Now, just over a year later, Arm has applied to go public in the US with a listing on Nasdaq. It’s reportedly targeting to raise $8 trillion-$10 billion despite current troubled market conditions. This could potentially end up as the largest US listing of 2023, and will doubtless be a signal to some of a revival in the entire technology venture proposition.

Furthermore, according to SoftBank’s statement on the IPO, “SBG intends that Arm will continue to be a consolidated subsidiary of SBG following the completion of the proposed initial public offering”.

Market participants may or may not respond positively to that caveat. After all, SoftBank has had enough problems lately, and the IPO target range falls well short of the $32 billion it paid for Arm in 2016.

Arm’s future as a relisted entity could be interesting to watch if SoftBank continues to try to recover that purchase price. Total valuation of the entire company could be some $40 billion, although some reports suggest that SoftBank will seek a valuation of up to $50 billion. Meanwhile, SoftBank has nominated Arm CEO Rene Haas to its board of directors.

Private investors in SoftBank’s Vision Fund should be able to recoup at least some of their commitments via the IPO. The Vision Fund owns around 25% of Arm, with SoftBank owning the rest. The IPO plan is also fuelling speculation that SoftBank might seek to privatise itself in the wake of the listing.

Would a privatisation restore confidence in SoftBank’s investment model and encourage commitments to its two Vision Funds or future vehicles? That remains to be seen. Battered tech valuations caused a slump in its latest quarterly figures, and the sector shows little sign of turning round.

Furthermore, the era of cheap money that freed speculative capital to plough into vehicles like the Vision Funds, and SoftBank head Masayoshi Son’s very generously priced investments, appears to be over. That could put a question mark against SoftBank’s entire investment model. One IPO won’t make a summer.