Arm Holdings has started trading on the Nasdaq under the symbol “ARM”.
The chip design company’s valuation is a huge premium compared to other
Companies in the semiconductor market. SoftBank still owns about 90% of Arm.
Arm Holdings, a chip design company controlled by SoftBank
Shares soared nearly 25% in the first day of trading Thursday after selling for $51 a share in its initial public offering.
Arm’s public valuation is close to $60 billion. The company, which trades under the ticker symbol “ARM,” sold about 95.5 million shares. SoftBank took the company private in 2016 and controls about 90% of the outstanding shares. On Wednesday, Arm rated its stock at the upper end of its forecast range. Shares first traded at $56.10 on Thursday and closed at $63.59. It’s a huge prize for a British chip company. At a valuation of $60 billion, Arm would trade at more than 110 times earnings based on its most recent fiscal year earnings. That compares to Nvidia’s valuation, which trades at 108 times earnings, but ignores Nvidia’s 170% growth forecast for the quarter.
Arm’s chief financial officer, Jason Child, told CNBC that the company is focusing on growing royalties and providing customers with more expensive products with more features. Many of Arm’s royalties come from products released decades ago. About half of the company’s royalty revenue, estimated at $1.68 billion in 2022, comes from products released between 1990 and 2012. “As a CFO, this is one of the best business models I’ve ever seen. Sometimes I joke that the old products are like the Beatles catalog and they just keep pumping in royalties. Some of these products are thirty years old,” Byrne said.
In a presentation to investors, Arm said it expects the total market value of its chip designs to reach about $250 billion by 2025, including growth in data center and automotive chip designs. Arms’ revenue fell less than 1% to $2.68 billion in the year ended March from a year earlier.
The Arm architecture is used in almost all smartphone chips and describes how the central unit works at the most basic level, such as performing arithmetic or accessing computer memory. Byrne said the company sold shares worth $735 million to a group of strategic investors that includes Apple, Google, Nvidia, Samsung, AMD, Intel, Cadence, Synopsis, Samsung and TSMC. This is a testament to Arm’s influence among chip companies that rely on Arm technology to design and manufacture their chips. “There is interest in buying more shares than listed, but we want to make sure we have a diverse group of shareholders,” Childs said.
SoftBank CEO Masayoshi Son highlighted how Arm’s technology could be used in artificial intelligence chips in an interview with CNBC on Thursday as he tries to tap the company into the recent boom in artificial intelligence and machine learning. He also said he wanted to keep the company’s remaining Arm shares as long as possible.
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