Investor Frenzy Over Arm's IPO Pushes Valuation To New Heights, Could Skyrocket To $54B

The UK-based chip design firm, Arm Holdings, is gearing up for a blockbuster initial public offering (IPO) that could value the company at a staggering $54 billion. The IPO is slated to be the most significant in the tech sector in two years.

What To Know: Arm and its parent company, SoftBank SFTBF, are in the final stages of pricing their shares for the IPO.

Trading is expected to commence on Thursday on the Nasdaq exchange. The share price is likely to exceed initial estimates due to overwhelming demand, Financial Times reports.

The IPO has garnered immense interest, with the stock being more than five times oversubscribed. This has led to the anticipation that the share price could be set above the initial range of $47 to $51.

The IPO is expected to raise approximately $5 billion for SoftBank, which is offering 9.4% of Arm's stock.

SoftBank initially hoped Arm would be at as much as $70 billion, however that was dampened by investor concern due to a recent decline in profits.

Tensions with China on the technology front and growing demand for AI are other factors which will impact Arm going forward.

Why It Matters: It is the largest since Rivian RIVN went public in 2021, raising about $12 billion. The tech sector has seen a decline in valuations over the past 18 months due to economic uncertainties and rising interest rates.

Major tech companies like Apple AAPL, Google GOOGL, Nvidia NVDA, Samsung, Intel, and TSMC are expected to buy $735 million worth of Arm shares at the IPO price.

The roadshow for the IPO kicked off in Baltimore, emphasizing the role of asset manager T. Rowe Price TROW in significant IPOs.

The IPO is being underwritten by a consortium of 28 banks, including Goldman Sachs, JPMorgan, and BofA Securities. Orders for shares were closed a day earlier than planned due to the high demand.