Arm confirms U.S. listing, SoftBank reiterates: retaining stake

Arm recently announced that it has confidentially submitted a draft registration statement on Form F-1 to the U.S. Securities and Exchange Commission (“SEC”) in connection with its proposed initial public offering. Depositary shares representing its ordinary shares. The size and price range of the proposed offering have not yet been determined. The IPO is subject to market and other conditions and the completion of the SEC review process.

SoftBank Group Corporation ("SBG") subsequently issued a statement stating that SBG intends that Arm will continue to be a consolidated subsidiary of SBG upon completion of the proposed initial public offering. SBG does not expect any such issuance to have a material impact on its consolidated results or financial condition.

The wording confirms SoftBank's intention to retain a majority stake in Arm after it goes public. The statement that the listing would not have a material impact on its results or financial condition suggests that only a small portion of Arm will go public.

Arm's disclosure on Saturday did not indicate that it was filed over the weekend, as the Securities and Exchange Commission allows non-public filings. The disclosure may instead reflect Arm's decision to confirm the accuracy of the float report rather than let speculation flourish.

However, forecasters still have a lot to think about. Statements from both Arm and SoftBank added: "The size and price range of the proposed offering have not yet been determined. The IPO is subject to market and other conditions and the completion of the SEC review process."

Reuters reports that the chip designer will favor Nasdaq - the exchange historically home to many technology companies. Wherever Arm lands, its launch will be closely watched for several reasons.

One is that the float is expected to be one of the largest IPOs of 2023.

Another is that SoftBank's recent financial health has been far from stellar. With tens of billions of dollars in losses already crushing its bottom line, the sale of Alibaba stock alone adds some decency as the investment firm's slew of bets on startups fail to materialize.

When SoftBank acquired Arm for $32 billion in 2016, the acquisition was seen as a bet on growing demand for chips. Nvidia offered $66 billion to acquire Arm before regulators blocked the deal, a strategy that seemed sound.

Chip demand has since fallen significantly as the global economy slows.

As a result, how much stake SoftBank can acquire in any part of Arm it decides to float will be closely watched - both for its contribution to the Japanese company's finances and as an indicator of investor sentiment.

According to the BBC, Arm's decision has raised concerns that the British market is not doing enough to attract technology company stock issuances, while US exchanges are seen as offering higher visibility and valuations.

The registration shows SoftBank is pushing ahead with billions of dollars in sales despite tough conditions in global financial markets.

The number of stock market listings has dropped sharply since the conflicts in Russia and Ukraine. Meanwhile, stocks of major technology companies fell in the wake of the pandemic.

Last year, SoftBank scrapped a $40 billion sale of Arm to technology group Nvidia after facing regulatory hurdles in the UK, US and EU.

The chipmaking industry faces slowing demand after a severe shortage of semiconductors during the pandemic. Last week, U.S. chipmaking giant Intel reported its largest quarterly loss in the company's history, while South Korean rival Samsung reported a profit drop of more than 90%.

A successful IPO for Arm would be good news for its owner SoftBank. Its Vision Fund suffered losses as the valuations of many of its investments in technology startups fell.

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