Arm's valuation in doubt, Samsung sits on its hands as IPO threatens to hit another snag

Arm in the toss a few years after selling to NVIDIA unsuccessfully, opened the IPO listing journey. It was originally rumoured that Apple, Samsung, NVIDIA, etc. will buy its shares before the listing, Arm's IPO valuation has reached 60 billion U.S. dollars. However, at the time Arm plans to go public in September, there are revelations that Samsung's investment attitude has changed.

Arm in the toss a few years after the unsuccessful sale to NVIDIA, opened the IPO listing journey. It was originally rumoured that Apple, Samsung, NVIDIA and others would buy its shares before the IPO, and Arm's IPO valuation reached $60 billion. However, in Arm plans to go public in September, there are revelations that Samsung's investment attitude has changed.

Recently, according to foreign media reports, Apple, Samsung Electronics, Nvidia and Intel are planning to SoftBank's chip design company Arm in September when the listing to buy its shares.

Arm IPO of the winding road

Arm plays an integral role in the technology industry, licensing its chip designs to more than 500 companies, including Apple, and 95 per cent of the world's smartphones use Arm architecture.

In 2016, SoftBank Group acquired Arm for $32bn. the group now controls around 75 per cent of Arm, with the remaining 25 per cent held by SoftBank's Vision Fund, which intends to sell between 10 per cent and 15 per cent of Arm's shares on the market, which could free up space for investments from companies such as Apple.

On 13 September 2020, SoftBank Group announced that it would sell Arm to NVIDIA in a deal valued at $40 billion. However, the deal ended in failure due to major regulatory challenges and opposition from competitors.

After NVIDIA's deal to buy Arm for $40 billion fell through, Arm announced plans to go public. Last September, the company's CEO Rene Haas (Rene Haas) said in an interview that he decided to apply for an IPO because the company "began to turn to other markets", for example, for cloud computing products licensing chip design.

Arm will be listed on the Nasdaq in September, SoftBank will be submitted to the U.S. Securities and Exchange Commission (SEC) in mid- to late-August to apply for listing, and then get the approval of the Nasdaq, the official IPO.

Foreign media said, as part of the IPO, Arm apparently hope that major chipmakers become its long-term shareholders, to them respectively sell a few per cent of the shares, and chipmakers hope that by holding shares of Arm, the management of Arm to have an impact.

In response, Apple, Samsung, NVIDIA and others have said they will buy Arm shares to support them.

Arm valuation

Reuters reported in June Arm is in talks with Apple, Samsung and Intel and other about 10 companies, the purpose is to introduce one or more major investors in this offering, if the investment is implemented, Arm's valuation will be pushed up to more than $60 billion, which will be the world's largest IPO so far this year.

Based on the valuation, Arm's stock could trade at about 22 times revenue. That multiple is well above its semiconductor industry peers. Qualcomm has a price-to-sales ratio of 2.97, while AMD and Broadcom have price-to-sales ratios of 7.75 and 10.97, respectively.

Samsung attitude change

It was revealed that Samsung would need at least 1.6 trillion won ($1.2 billion) to buy a 2% stake.

According to the Korea Economic Daily, although Samsung is the world's largest memory chip maker, also used a lot of Arm's authorisation, but it has reservations about this, either because of Arm's valuation of scepticism.

Samsung Electronics is not eager to invest in Arm's reasons, in addition to Arm's valuation is too high, the rise of potential competitors also reduces the attractiveness of Arm as an investment target.

In particular, the rise of RISC-V open source platforms, more and more startups use RISC-V to design and manufacture chips, these platforms have the potential to replace Arm's proprietary technology.

From Samsung's point of view, holding a minority stake in Arm cannot have an impact on management and is unlikely to reduce the royalties it pays to the British company.

A semiconductor industry officials said: "Softbank Masayoshi Sun may feel some tension, but there is no urgency for Samsung Electronics. If they make attractive offers, Samsung will consider buying a stake in Arm."

Conclusion

Arm was sold, controversy in China, was rejected to sell, to solve the problem of China, and then apply for IPO listing, after several twists and turns, see finally going public, but killed the RISC-V this dark horse, so far, Arm or has missed the best time for IPO or high price sale.

In the future, open source RISC-V will be more and more attention, in the world's major semiconductor giants and Chinese chip company support, will eventually form a strong competition with Arm.

Since Samsung's doubts, other semiconductor giants' investments should also be variable, and Arm's path to IPO is expected to remain a bit bumpy.