• By Vaamanaa Sethi
  • Sat, 09 Sep 2023 03:05 PM (IST)
  • Source:JND
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Arm Holdings Plc, the chip designer owned by SoftBank Group Corp, which is aiming to raise approximately $5 billion in its initial public offering, has experienced investor demand that surpasses its fundraising target by sixfold, people familiar with the matter  were quoted as saying by Reuters.

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The sources clarified that the oversubscription doesn’t guarantee a strong performance for Arm’s IPO, however, it makes it more likely that the company will at least reach its targeted price range of $47 to $51 per share.

The price range places Arm's valuation at $50 billion to $54.5 billion on a fully diluted basis. This marks a decrease from the $64 billion valuation when SoftBank acquired the remaining 25% stake in the company just last month, a stake it did not previously own, from its $100 billion Vision Fund.

It's uncertain whether Arm will generate sufficient investor interest to consider a higher valuation as it approaches its IPO pricing on September 13. Sources have indicated that Arm will make a decision early next week regarding the possibility of adjusting its IPO price range.

This week, Arm initiated its marketing campaign for what is poised to become the most significant U.S. IPO in two years. The company aims to persuade investors that it possesses growth opportunities beyond its dominant presence in the mobile phone market, where it currently commands a 99% market share.

During a discussion with potential investors in New York on Thursday, Arm indicated that the cloud computing market, in which it currently holds a 10% share, offers substantial room for growth. This market is projected to experience an annual growth rate of 17% through 2025, driven in part by advancements in artificial intelligence. In contrast, the automotive market, where Arm commands a 41% share, is expected to expand by 16%, while the mobile market is anticipated to grow at a more modest rate of just 6%.

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Arm also informed investors that its royalty fees, which make up the majority of its revenue, have been accruing since it commenced collection in the early 1990s. In the most recent fiscal year, royalty revenue reached $1.68 billion, up from $1.56 billion in the previous year.