SoftBank boss Masayoshi Son faces a sobering end to his six-year chip party, write KarenKKwok and peter_tl
. An initial public offering will probably mean the Japanese group accepting a valuation below the $32 billion it paid for the business in 2016.
SoftBank has few alternatives to an IPO. Regulators are dubious about consolidation in an industry grappling with global shortages and concerns over the reliability of supply chains. The UK company’s neutral position, offering its chip designs to everyone without favouring a single customer, rules out most prospective buyers. Another mooted idea – selling Arm to a consortium of chipmakers – would prove difficult and unstable.
It’s also a tricky time for a stock market listing. The recent selloff has whacked highly valued tech stocks, prompting some private startups to postpone their market debuts . However, valuations for chipmakers are still relatively buoyant. Nvidia shares are worth almost twice as much as when the company run by Jensen Huang unveiled its Arm takeover in September 2020.Arm’s revenue grew 9.5% to almost $2 billion in the year to March 2021, according to UK Companies House. Assume its top line grows at the same rate for the next three years and sales will hit $2.6 billion. Nvidia trades at 16.
Son will hope that stock market investors see the same potential in Arm that he touted when buying the business almost six years ago. But barring an unlikely stock market revival, his chip splurge faces a financially disappointing end.
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