Arm Holdings Ltd.’s initial public offering is already falling short of lofty expectations, despite riding the AI wave and listing amid the tech giants in New York.
(Bloomberg) — Arm Holdings Ltd.’s initial public offering is already falling short of lofty expectations, despite riding the AI wave and listing amid the tech giants in New York.
The Cambridge-based company, which snubbed the London Stock Exchange earlier this year, is aiming for a market value of close to $55 billion, based on calculations from filings released on Tuesday. That’s well below initial reports of a target of up to $70 billion.
“It’s a lot more challenging for Arm to capitalize on the current trend for AI than a company like Nvidia,” said Albie Amankona, analyst at Third Bridge. That’s because a big chunk of Arm’s revenues are derived from mobile, while the AI market is centered around cloud-based operations, he said.
The lowered value is a letdown to Softbank’s Masayoshi Son, who sought to flourish in the era of artificial intelligence computing that has helped Nvidia Corp. scale a $1.2 trillion market capitalization after the stock’s 231% jump this year. Arm is also facing risks from an economic slowdown in China, which accounted for a quarter of its sales in the year ended March.
The company could still raise more or less money depending on investor demand on its roadshow. After the IPO, SoftBank will still control about 90% of Arm’s shares.
However, choosing New York for its IPO over London — where it used to trade before Softbank’s takeover in 2016 — was not a surprise. The UK’s troubled equity market has failed to attract any significant tech listings since Wise Plc and Deliveroo Plc in 2021, and both stocks have struggled since their market debut.
“UK tech is such a small part of global tech industry that they had little choice than going to the US,” said Neil Campling, a founding partner at hedge fund Chameleon Global Cap. However, the move did little to help on the valuation front, he said.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.