Japanese Conglomerate Softbank on Thursday made a windfall of $4.44 billion after the market capitalisation of British chipmaker Arm jumped 25 percent after its debut on Nasdaq on Thursday.
Arm listed its shares at $51 apiece on its market debut, valuing the company at $54.5 billion. After the first day of trading, the market capitalisation of Arm zoomed 25 percent to $64 billion. The Masayoshi Son-run Softbank, which fully owned Arm before the IPO, sold about a 10th of its shares, earning $4.44 billion. It now owns a 90.6 percent stake in Arm, the value of which shot up from just under $50 billion pre-IPO to $61.6 billion.
Son, speaking to CNBC, said he was confident that Arm's value will only increase in the long-term.
"We – SoftBank owned 75 percent of Arm until just a few weeks ago ... and bought back from 75 percent to 100 percent from Vision Fund. I’m more confident about the future. I think the value is going to have a good upside (in the) long term. And that’s why I bought back at a higher price than $51. And I just want all the investors to have a good time going forward," Son said.
Arm is one of the most important chip companies in the world. It sells licences to an instruction set at the heart of nearly every mobile chip, and increasingly, PC and server chips as well. In recent years, it has aimed to sell more complete chip designs, which is more lucrative.
Arm chips are made by companies including Amazon, Alphabet, AMD, Intel, Nvidia, Qualcomm, and Samsung, according to the filing. Its technology is also included in Apple’s chips for iPhones. Arm said that its technology was included in over 30 billion chips shipped in its fiscal 2023. Arm typically takes a fee on every chip that is shipped using its technology.
Softbank acquired Arm for $32 billion in 2016 and took the chipmaker private.
While Arm had previously aimed to raise $8 billion to $10 billion, that target was lowered at least in part because SoftBank decided to buy the roughly 25 percent stake held by its Vision Fund and then hold onto a larger portion of the shares in the company.
NVIDIA had announced that it will acquire Arm in 2020 in a $40 billion cash and stock deal. The deal size almost doubled courtesy of a jump in Nvidia's stock price. However, the deal was called off in 2022 after European and US antitrust regulators blocked the deal saying it killed any potential competition.
Son, in the CNBC interview, said he never wanted to sell Arm to NVIDIA, but the pandemic and his belief in NVIDIA's future prospects made it a sensible proposition at the time.
"We did not want to really sell. It was the COVID that made me go into protective mode.(But) I believed in the future of Nvidia back then, and it was right. And I believed in the combinations of the power of the two companies would (have been) be enormous," he said.
Arm's was the biggest listing in the US since Rivian Automotive debuted in late 2021 at a valuation of over $100 billion. Shares of Rivian are currently trading around the $20 mark from its peak of $180. The correction marked an end to the euphoria around IPOs for a good two years.
Also read: Softbank-backed Arm Holdings ends 25% higher on trading debut with a valuation of nearly $70 billion
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