Interactive Investor

Arm Holdings reveals how much its shares might cost in $52bn IPO

This UK tech company has grown from small Cambridge-based firm to global giant and is now close to floating on Nasdaq. Graeme Evans explains what the business will be worth and how UK investors can buy the stock.

6th September 2023 15:50

by Graeme Evans from interactive investor

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IPO float listing

The stock market return of ARM Holdings ADR (NASDAQ:ARM) will next week value the UK’s most successful technology company at up to $52 billion (£41.4 billion), the biggest IPO for two years.

Cambridge-based Arm launched its investor roadshow in Baltimore yesterday as it drummed up support for the Nasdaq-listed sale of 95.5 million American depositary shares.

The chip designer’s cornerstone investors, including major clients such as Apple Inc (NASDAQ:AAPL), Alphabet Inc Class A (NASDAQ:GOOGL), Intel Corp (NASDAQ:INTC) and NVIDIA Corp (NASDAQ:NVDA), have already committed to buy $735 million (£568.1 million) of shares.

The strength of demand for the remainder at an offer price of between $47-$51 a share will determine the outlook for further new issues, with the likes of grocery delivery service Instacart and marketing software platform Klaviyo among those waiting in the wings.

It’s been a barren couple of years for IPOs, with the last big offering in November 2021 when electric car maker Rivian Automotive Inc Class A (NASDAQ:RIVN) made its debut with a valuation of $66.5 billion (£53 billion).

Interest in Arm has been fuelled by the meteoric stock market rise of semiconductor giant Nvidia as companies raced to apply generative AI into their products and services.

As well as working with Nvidia, Arm’s technology is used to run AI workloads for companies including Mercedes-Benz Group AG (XETRA:MBG), Meta Platforms Inc Class A (NASDAQ:META) and Google owner Alphabet.

Arm says it now has more than 1,000 technology partners “enabling artificial intelligence to work everywhere”. Its processor designs and software platforms have already enabled advanced computing in more than 250 billion chips, with technologies that power products from the sensor to the smartphone and the supercomputer.

In documents filed on Tuesday, Arm revealed it had signed a new long-term agreement with Apple enabling the iPhone maker to continue developing processors using Arm’s designs.

Arm recorded total revenues of $2.68 billion (£2.46 billion) in the year to 31 March, with the company’s record of profitability meaning it stands out from most other new technology listings.

About a quarter of sales come from China, a potential worry for investors given an ongoing technology war with the United States.

Arm came close to the ownership of Nvidia last year but the $66 billion sale was scuppered by competition issues. Japan’s SoftBank, which bought Arm for £24 billion in 2016, will continue to hold over 90% of Arm’s ordinary shares following next week’s proposed listing.

The use of American depositary shares enables overseas companies to list their ordinary equity on an American stock exchange, meaning US investors can buy the securities without the risks of cross-border and cross-currency transactions.

SoftBank and Arm confirmed in March that New York would be the home for the stock market return but they kept the door open for a secondary listing in London at a later date. UK investors will be able to participate in the listing once dealings have started in the US.

Arm soared in value after its original dual stock market listing in London and on New York’s Nasdaq in April 1998. It was originally established in 1990 as a joint venture between Acorn Computers, Apple and VLSI Technology.

Your guide to buying Arm Holdings shares with ii

Early investment in Arm Holdings is not available to UK retail investors but you will be able to buy shares through ii on the first day they start trading. 

Here are the steps you can take in advance to be ready for day 1:

1.    Open an account

You will be able to hold shares in our Trading Account, SIPP, ISA and Junior ISA.

2.    Complete the exchange agreements

You need to complete this form before you make your first international trade. We will prompt you to complete the agreements the first time you search for an international share price.

3.    Complete a United States dealing (W-8) form

Before you can buy US-listed shares you need to have completed a W-8 form. You can do this online by logging in and visiting our Useful Forms page. You don't need to do this if you are only investing in a SIPP.

On the day shares are admitted there will likely be an initial period of price stabilisation, after which trading commences. This may only be a few minutes but can take a few hours.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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