(Yicai) Sept. 7 -- UK chip designer Arm Holdings' initial public offering was intended more for the benefit of its parent company SoftBank Group, according to James Early, chief investment officer of digital investment platform BBAE.
"I think this IPO was intended more for SoftBank's benefit than for Arm's, but it should lead to Arm getting more capital for research and development to move into data centers and artificial intelligence," Early told Yicai in a recent interview.
Arm plans to issue 95.5 million American Depository Shares at USD47 to USD51 per share, aiming to raise between USD4.5 billion and USD4.9 billion, according to an updated filing the firm submitted on Sept. 5. As the shares issued by SoftBank would equal to only 9.4 percent of Arm's total, the IPO would value the firm at over USD52 billion.
SoftBank took Arm private for USD32 billion in 2016 and then sold a 25 percent stake to Vision Fund 1 for USD8 billion the following year. On Aug. 28, the Japanese multinational investment holding firm bought back the 25 percent stake in Arm from VF1 For USD16 billion in a move that valued the chipmaker at USD64 billion.
SoftBank asked 28 investment banks to join Arm's IPO, a very high number, Early said, adding that this likely signals SoftBank's difficulties in selling Arm's shares. There are also risks from the perspective of macro policies, he noted.
"SoftBank's real goal may be to borrow against the value of its Arm shares, rather than just to make money from the IPO," Early pointed out.
Arm's IPO will be the largest of the year and the bellwether, Early said. The market will worry about the IPO environment this autumn and winter if such a closely-watched IPO fails, he added, noting that if it instead beats expectations, other tech firms may also try launching IPOs.
But given that the IPO market is quite slack now, it is unlikely that a single firm can heat up the market with its success, even if it is Arm, Early concluded.
"This year's IPO landscape has been anemic, even if it's better than last year, which was the worst since 2008," according to Early. "So any news is good news for US IPOs."
People should be cautious when investing in IPOs, as statistics show that the US IPO market is not a very good investment choice. However, it is highly possible for Arm to continue succeeding, given the firm's dominant position in the chip industry and the industry's strong and quick growth momentum.
Editors: Liao Shumin, Futura Costaglione