On August 21, local time, Arm Holdings Ltd, a subsidiary of Softbank Group.Filed an application with the U.S. Securities and Exchange Commission (SEC) seeking a listing on NASDAQ under the ticker symbol ARM。

According to the documents, the offering was led by four major investment banks, Barclays, Goldman Sachs, JPMorgan Chase and Mizuho Financial Group, as well as 24 underwriters, including Bank of America, Citigroup and HSBC.。

                 

Arm's Past Lives

                 

Founded in 1990 and headquartered in Cambridge, UK, Arm is a joint venture of Acorn Computers, Apple and VLSI Technology。The company was listed on the London Stock Exchange and Nasdaq from 1998 until 2016, when it was acquired by SoftBank, led by Masayoshi Son, for $32 billion.。The following year, SoftBank sold 25% of Arm to the Vision Fund for $8 billion.。

SoftBank had previously tried to sell Arm to Nvidia for $40 billion, which would be the chip industry's biggest acquisition.。But the takeover was opposed by U.S. and European antitrust regulators and Arm's own customers, and Nvidia abandoned the acquisition last year.。Subsequently, SoftBank began work on Arm's IPO plan。

Before the listing, Softbank spent another $16.1 billion to buy back most of Arm25% of the shares held by the Vision Fund.。SoftBank will remain Arm's controlling shareholder even if it starts trading, documents show。

Arm is a chip designer whose design has almost monopolized the chips at the core of every smartphone。"We estimate that approximately 70% of the world's population uses Arm-based products.。Last year, chips containing its technology accounted for 49% of the potential market (worth more than $200 billion).。

Although Arm's technology is applied to almost all smartphones, its reputation among consumers is far less "loud" than NVIDIA and the like。Arm sells the blueprints needed to design microprocessors and licenses technologies called instruction sets that determine how software programs communicate with those chips.。Arm's technology makes it widely used in mobile phones, because the battery life of mobile phones is crucial。

Arm makes money primarily from technology prepaid license fees and royalties paid for each chip sold by Arm customers.。The company has been expanding those royalty revenues, and according to its filing, the company said its latest version of the technology "has the potential to push our royalty opportunities higher per device."。

In addition, Arm's technology has gained 10% market share in cloud computing, and Arm-based chips are used in networks as well as central processing units in servers.。

The company said it owns or co-owns about 6,800 issued patents and that around 2,700 patent applications are pending worldwide.。

In the last fiscal year, more than 260 companies, including Amazon, Alphabet, Qualcomm and AMD, were using Arm-based chips.。The company has worked with its top ten customers (as measured by royalty revenue) for an average of more than 20 years.。

                 

Arm's "Danger" and "Machine"

                

However, Arm's return to the open capital markets after seven years comes amid the smartphone market's worst recession in a decade。

At present, the entire chip industry is still dealing with the decline in sales, and the smartphone market has been particularly hard hit.。Qualcomm, one of Arm's biggest customers, sent its shares plunging earlier this month after it issued lower-than-expected guidance for the next quarter.。Even demand for Apple's highly-regarded iPhone has slowed。

The impact can also be seen in Arm's earnings report。In the 12 months to March 31, Arm's revenue was 26, the documents show..$800 million, down 1%。Net profit fell 5% to 5.$2.4 billion。

Separately, the company noted in the filing that export restrictions in the U.S. and U.K. are hampering its sales in the Chinese market, which is one of the risks the company faces.。

Arm said about a quarter of its revenue in the most recent fiscal year came from China.。Among the risk factors listed in the filing, Arm warned that the company is "particularly vulnerable to economic and other related risks in China, the world's largest smartphone market."。

Arm has a unique ownership structure in China, and the company has exclusive rights to sublicense its intellectual property to Chinese customers such as Alibaba and Xiaomi.。Last year, Arm's royalty revenue in China declined due to slowing economic growth and related factors such as export controls.。

Arm's entire revenue in the Chinese market comes from Arm China.。Although Arm relies heavily on Ammon Technology, Arm has no direct management of Ammon Technology and only indirectly holds Ammon Technology 4.8% stake, the majority stake in the entity is held by several Chinese investors。

Arm has to look for a new "blue ocean" amid continued smartphone slump。Rene Haas, who took over as CEO of Arm last year, said the company is now working to expand beyond the smartphone market, which has stalled in recent years.。He is now looking at other businesses such as chips for data centers and artificial intelligence applications.。

Arm's valuation also rose thanks to the company's move to AI。

Arm plans to begin its roadshow in the first week of September, followed by pricing the IPO the following week.。The company did not disclose the terms of the proposed share sale in the filing, but Arm aims to raise $8 billion to $10 billion in the IPO, seeking a $60 billion to $70 billion valuation.。

According to the documents, the valuation of Arm at the time of SoftBank's purchase of the Vision Fund's stake was around $64 billion.。

A successful IPO of Arm would be a windfall for SoftBank founder Masayoshi Son, whose Vision Fund lost a record $30 billion last year.。CEO Haas is expected to receive $20 million in cash awards and $20 million in stock awards upon IPO completion。

It is worth mentioning that this listing is expected to become a new company from electric vehicle manufacturer Rivian Automotive Inc..The largest U.S. IPO since the $13.7 billion offering in October 2021, when Rivian went public with an initial market capitalization of $70 billion。But Arm should still be valued below the tech industry's biggest-ever IPO: Alibaba Group's $25 billion offering in 2014 and Meta's $16 billion IPO in 2012.。

Arm's target valuation reflects that the company will benefit from the boom in AI chips and generative AI.。And this wave of AI has helped chipmaker Nvidia get 1..$2 trillion valuation。

Pitch Book analyst Kyle Stanley said: "Arm's strong performance will not only bring a huge windfall to SoftBank, but also strengthen its AI strategy by showing that the market topic around AI has not diminished.。"