Corporate Value Likely Lower Than Initially Expected
The offering price of ARM, a UK semiconductor design company planning to list on the US Nasdaq, is expected to be set at around $47 to $51 per share. Accordingly, the company's valuation is estimated to be between $50 billion and $54 billion (approximately 65.9 trillion to 71.3 trillion KRW).
On the 3rd (local time), The Wall Street Journal (WSJ) reported that this valuation is lower than the $64 billion valuation estimated when SoftBank purchased a 25% stake in ARM through the Vision Fund, and assessed that this IPO will fall significantly short of the expectations of SoftBank Chairman Masayoshi Son.
When Chairman Son acquired ARM in 2016, the acquisition price was $32 billion (about 42 trillion KRW). At that time, CEO Son expressed joy, calling the ARM acquisition an "inevitable destiny" after decades of technology investment, and confidently predicted "5 times growth within 5 years."
This decline in value is due to the anticipated decrease in demand for some of ARM's products. Last year, ARM generated nearly a quarter of its revenue from the Chinese market, but with China's economic growth slowing and geopolitical tensions rising, business uncertainties are increasing.
ARM's revenue for the one-year period ending in June was $2.7 billion (3.5 trillion KRW). According to the World Semiconductor Trade Statistics (WSTS), ARM's revenue growth rate since 2016 has been 65%, which is not significantly different from the global semiconductor revenue growth of 52% during the same period, but it lags far behind industry leaders. Profit also dropped significantly to 20% of revenue (based on the most recent fiscal year), compared to 34% in the year before SoftBank's acquisition.
Nevertheless, ARM is reported to have already attracted many major customers as IPO investors. Among them are Samsung Electronics, Apple, Nvidia, Alphabet, AMD, Intel, Cadence Design, and Synopsys. These companies consider ARM's semiconductor designs essential resources, and it is analyzed that they participated as investors to expand business relationships with ARM and prevent competitors from gaining an advantage.
Headquartered in Cambridge, UK, ARM holds core technologies in semiconductor design that serve as the "brain" of IT devices such as PC central processing units (CPUs) and smartphone application processors (APs). About 260 companies, including Amazon, Alphabet, Qualcomm, and AMD, use ARM chips.
After acquiring ARM in 2016, SoftBank attempted to sell ARM to Nvidia for up to $40 billion in 2020, but the deal fell through due to opposition from regulatory authorities in various countries. Consequently, SoftBank shifted its strategy to recover funds by listing ARM on the US stock market instead of selling it.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
