Well designed
September’s US$5.2bn IPO of Arm Holdings was the biggest of the year and capitalised on the hot topic of generative artificial intelligence. It gave an opportunity to talk about growth when nearly all smartphones already contain Arm-designed chips.
Arm’s return to public markets ranked as one of the year’s big capital markets events globally, representing the first US tech IPO of 2023 and the largest US offering in two years. Having taken Arm private in 2016, SoftBank unsuccessfully attempted to sell the business to Nvidia in 2022 before pivoting to a Nasdaq IPO.
"What investors discovered … is this was a company that had changed dramatically both in terms of its revenue model, its engagement with customers, the breadth of its services and the growth opportunity," said Tom Swerling, Barclays’ global head of ECM.
A syndicate led by Barclays, Goldman Sachs, JP Morgan and Mizuho conducted two rounds of pilot fishing – testing the waters in the US parlance – with investors globally to reintroduce the company before launching as the first deal in September.
"It’s worth noting the extensiveness of the TTW and marketing process, which really stretched to all parts of the world rather than being just US-centric," said Lizzie Reed, Goldman Sachs' global head of equity syndicate.
The banks also oversaw a cornerstone investor process with clients to validate Arm's strategic significance. A group of 10 strategics, including Apple, Alphabet, Nvidia and Taiwan Semiconductor Manufacturing, bought US$735m of shares.
The two-week public roadshow culminated in the sale of 102.5m American depositary shares representing 10.1% of Arm at US$51, the top of the US$47–$51 marketing range, to value the company at US$54.5bn.
Arm closed its debut session at US$63.59, 24.7% above offer. It did fall back to below US$48, not helped by the performance of IPOs that came in its wake, yet finished the year at US$75.15, up nearly 50%.
The cornerstone round was the largest of any IPO in two years and more importantly was the largest ever by strategic investors.
"We have such long-term relationships with these companies and some like Apple are technically our co-founders," said Jason Child, Arm’s CFO, noting Arm's broad client base meant it was often described as the "Switzerland of CPUs".
Rarely does a company of Arm’s heft show up in the new issue market, its novelty, size, timeliness and backing from big tech helped ensure the global roadshow drew a huge audience of more than 650 institutions and orders of US$58bn.
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