Apple, Samsung, and Intel to invest in Arm IPO, and emerge with some control: report

UK-based chip designer Arm will be floated in September, and its biggest licensees will be among those bidding for big shareholdings on day one.

So says Japan's Nikkei, which on Wednesday reported an IPO on the US NASDAQ index – an outcome that will not please the UK government, had lobbied for any float to be on a British bourse.

The report suggests Arm could be valued at $60 billion by the time of the IPO, so British lobbying is understandable.

Lending credence to the report was Yoshimitsu Goto, CFO of Arm's current owner SoftBank, who on a Tuesday earnings call was asked about an IPO for the chip designer and responded "Sorry, I can't share. I'm not allowed to share more. Forgive me. But I don't think it's far away, when you get more information." Which is kind of a little bit like sharing.

Nikkei's report adds that big users of Arm's IP – among them Nvidia, Apple, and Samsung – will bid for shares as soon as they hit the market. So will Intel, the outlet reported, confirming a past rumor.

Arm will welcome those bids and is happy for "a few percent" of its stock to end up in the hands of its biggest customers – even though Nikkei's report suggests that "By holding Arm's shares, chipmakers will hope to have sway over Arm's management."

Whether investor/licensees intend to twist Arm simply by throwing their weight around, or by acquiring sufficient scrip that they can demand a board seat, is not discussed in the story.

Complicating matters is that Arm is currently owned by Japan's SoftBank Group, which holds 25 percent of the business in its Vision Fund and the remainder in its general business.

• Up to 40% of all Arm servers are deployed in China
• Nvidia's Arm wrestle – from failed acquisition to possibly anchoring IPO
• Intel approached to take on key investor role in Arm IPO
• Arm announces Cortex-X4 among latest CPU and GPU designs

As it happens, SoftBank reported its Q1 2023 results on Tuesday and in the earnings call CFO Yoshimitsu Goto stated "Vision Fund will not only invest in public companies but also private companies as well, which includes Arm" before adding "When Arm is listed and when its valuation is appreciated by the market, I believe that Arm will contribute to Vision Fund a lot."

Whether that means SoftBank intends holding on to a chunk of Arm, or cashing out, was not discussed. SoftBank has used both tactics in the past – offloading a big chunk of its Alibaba stake to produce cash, while keeping more scrip as a longer-term investment.

SoftBank also repeated its previous observation that Arm has filed preliminary paperwork with the US Securities and Exchange Commission, without specifying the size and price range for any public offering.

As The Register reported in May 2023, when the draft was revealed, SoftBank's proposal appeared to be structured so it will retain control of Arm.

Just how much of Arm is floated, and what the purported big buyers' stakes let them do, is therefore a subject for delicious speculation. Apple, Nvidia, and Samsung have all bet big on Arm, and will want it to be stable and to innovate. Intel wants its fabrication business to be good at wrestling Arm designs into production.

Back to those SoftBank results: Arm produced $641 million of license and royalty revenue for the quarter, down from $719 million in Q1 2022.

SoftBank execs suggested that's nothing to worry about, as the global chip biz is currently in a downturn and Arm's three-year compound annual growth rate is 14 percent. With AI set to boost chip sales, and increased use of tech in automotive settings to drive increased consumption, SoftBank sees Arm flexing its muscles in future.

The conglomerate also told investors it is going on the offense, having recently splashed out over $1.8 billion after making almost no investments in 2022, and plans to make more investments soon.

It's hoped those investments boost returns for SoftBank's Vision Fund, which returned to positive cashflow after five quarters.

But SoftBank's overall operations produced a $3.3 billion loss. Execs seemed unworried, attributing with some of the losses to share price falls for investee businesses. ®