According to sources familiar with the situation, SoftBank Group Corp. expects to keep a majority share in Arm Ltd. following the scheduled initial public offering of the semiconductor company, selling a lower portion than originally intended.
After a deal to sell Arm to Nvidia Corp. fell through earlier this year, SoftBank decided to go public with the company it bought in 2016. According to one of the people who asked not to be identified because the proposal isn’t yet public, SoftBank has determined that selling a lesser share of Arm now, given the present collapse in chip stocks, will allow it to receive a greater valuation for the balance later.
According to the people, SoftBank’s $8 billion term loan, guaranteed by Arm shares, has given it the financial flexibility to keep a larger stake in the company and wait for better market conditions. According to them, the IPO will most likely take place in the first quarter of next year, but the size and timing of the offering may alter.
Arm sells and licenses semiconductor-related technology that is used in everything from cellphones to supercomputers. The pervasiveness of its devices has made its proposed IPO in the $550 billion chip sector a hotly anticipated event.
According to Bloomberg, Tokyo-based SoftBank is seeking a valuation of at least $60 billion for Arm. It’s hoping for a greater price than it would have received if it had sold the chip creator to Nvidia, which it failed to do.
SoftBank has lined up 11 lenders for the $8 billion term loan secured by Arm shares, including JPMorgan Chase & Co., Barclays PLC, Banco Santander SA, BNP Paribas SA, Credit Agricole Corporate and Investment Bank, and Goldman Sachs Group Inc., the Japanese business said earlier this month.
Masayoshi Son, the company’s CEO, bought Arm for roughly $32 billion and utilized the money to hire a lot of people in order to break into new areas like server chips for data centers.
Despite the fact that chip demand and sector profitability have continued to rise this year, investors have been increasingly wary of such equities. As demand plateaus and new supply is brought online, there is concern that shortages of electronic components could turn into a surplus.
The Semiconductor Index of the Philadelphia Stock Exchange has lost 22% this year, outperforming the S&P 500 and other benchmarks. The chip index had more than tripled in value since 2017 prior to that reversal.