arm ipo (2023) – easy explain

Arm IPO 2023: Full Details

Today, I want to talk to you about a very exciting event that is expected to happen in the tech industry in September 2023. It is the initial public offering (IPO) of Arm, the British chip designer that supplies core technology to companies including Apple and Nvidia. Do you know what Arm is and what its IPO means? If not, don’t worry, I will explain it to you in this blog post. 😊

What is Arm and what does it do?

Arm is a company that designs and licenses microprocessors, which are the brains of electronic devices such as smartphones, tablets, laptops, servers, and cars. Arm does not manufacture or sell its own chips, but rather provides the blueprints and instructions for other chipmakers to use and customize. Arm’s technology is known for being power-efficient and versatile, making it suitable for a wide range of applications and markets .

Arm was founded in 1990 as a joint venture between Acorn Computers, Apple, and VLSI Technology. It was listed on the London Stock Exchange and Nasdaq from 1998 until 2016, when it was acquired by SoftBank, a Japanese conglomerate, for $32 billion. SoftBank previously attempted to sell Arm to Nvidia, a US chipmaker, for $40 billion in 2020, but the deal faced regulatory hurdles and opposition from Arm’s customers. SoftBank then decided to pursue an IPO for Arm instead .

How big is Arm’s IPO and who are its backers?

Arm’s IPO is set to be the largest of 2023, surpassing Rivian Automotive’s $13.7 billion offering in October 2021. Arm has priced its IPO at $51 per share, valuing the company at over $54 billion based on its fully diluted shares outstanding. Arm plans to sell at least 95.5 million American depositary shares (ADS) on the Nasdaq under the symbol “ARM”. SoftBank will retain about 90% of Arm’s shares after the offering .

Arm’s IPO has attracted strong interest and support from some of the biggest names in the tech industry. Many of Arm’s customers, including Apple, Google, Nvidia, Samsung, AMD, Intel, and Taiwan Semiconductor Manufacturing Company (TSMC), have agreed to buy shares in the offering as part of their strategic partnerships with Arm. These companies rely on Arm’s technology for their products and services, and also collaborate with Arm on research and development .

What are Arm’s financials and growth prospects?

Arm’s financials show that it is a profitable and growing company, but also faces some challenges and uncertainties. According to its filings, Arm’s revenue in its fiscal year that ended in March 2023 slipped less than 1% from the prior year to $2.68 billion. However, its net income in fiscal 2023 dropped 22% to $524 million. Arm attributed the decline in revenue and profit to lower royalty payments from its customers due to the global chip shortage and inventory adjustments .

Arm expects its revenue and profit to improve in the current fiscal year as the chip demand recovers and its new products gain traction. Arm is also investing heavily in research and development to expand its product portfolio and address new markets and opportunities. Arm’s main focus areas are artificial intelligence (AI), cloud computing, internet of things (IoT), automotive, and 5G .

Arm believes that it has a unique competitive advantage in the chip industry due to its business model, technology leadership, customer base, and ecosystem. Arm claims that it has over 1,000 licensees that have shipped over 200 billion chips based on its technology since its inception. Arm also says that it has over 6,000 engineers working on cutting-edge innovations that will shape the future of computing .

What are the risks and challenges facing Arm?

Arm’s IPO also comes with some risks and challenges that investors should be aware of. Some of these include:

• Regulatory scrutiny: Arm’s IPO may face regulatory scrutiny from various authorities around the world due to its strategic importance and potential impact on competition and national security. For example, China’s antitrust regulator has reportedly launched an investigation into Arm’s IPO over concerns that it may harm Chinese chipmakers’ interests.
• Customer conflicts: Arm’s IPO may also create conflicts with some of its customers who may view it as a competitor or a threat. For example, Nvidia may face difficulties in integrating Arm into its business if other chipmakers decide to reduce their reliance on Arm’s technology or switch to alternative solutions.
• Technology disruption: Arm’s IPO may also expose it to technology disruption from new entrants or existing rivals who may challenge its dominance or offer superior solutions. For example, RISC-V is an open-source instruction set architecture that competes with Arm’s technology and has gained support from some chipmakers and software developers.

Conclusion

Arm’s IPO is a highly anticipated event that will mark a new chapter in the history of the chip industry. Arm is a leading company that provides the core technology for most of the electronic devices in the world. Arm’s IPO will give it more resources and flexibility to pursue its growth and innovation goals, and also reward its shareholders and customers.