The IPOX® Update 8/22/23

Semiconductor Giant Arm Files for Nasdaq IPO

British semiconductor designer Arm, a unit of investment firm SoftBank, has officially filed for an IPO on Nasdaq under the ticker "ARM". Based in the UK, Arm is responsible for creating key components that are integrated into almost every smartphone worldwide. Over 250 billion chips globally have incorporated Arm's technology. Significant tech behemoths like U.S. tech company Amazon, South Korean electronics giant Samsung, and U.S. technology firm Apple heavily depend on Arm's semiconductor designs. Arm's recent fiscal year showcased impressive figures, with revenues touching $2.68 billion and a stunning 96% gross profit margin. After its $32 billion acquisition by SoftBank in 2016, Arm's IPO might attract as much as $10 billion. This would potentially value the company between $60 billion and $70 billion, potentially making it the largest offering of 2023. (Source)

Arm's IPO Valuation Reflects AI Industry's Potential

As the AI industry continues to flourish, the IPO valuation of chip designer Arm hinges on the current AI hype. SoftBank, the investment firm, has pegged its 25% stake in Arm at an approximate $64 billion valuation. Interestingly, revenue metrics from smaller competitors suggest a valuation for Arm in the range of $32 billion to $43 billion. On the other hand, Bernstein Research places Arm's valuation near $40 billion but acknowledges the company's considerable growth potential in the AI sector. Comparing Arm's valuation with U.S. Processor-makers like Nvidia and AMD, both of which boast high Nasdaq valuations, becomes challenging. With the AI sector's rapid expansion, underlined by Nvidia's staggering 221% growth, there's increased anticipation around Arm's IPO. (Source)

Morgan Stanley Absent from Arm's Prominent IPO

In a surprising development, financial services giant Morgan Stanley will not participate in the much-anticipated IPO of semiconductor designer Arm. The IPO is touted to be the most significant of the year. Neither representatives from Morgan Stanley nor from Arm have issued statements on this development. It's worth noting that in 2019, Morgan Stanley refrained from partaking in WeWork's ill-fated IPO due to disagreements regarding roles. Additionally, Nvidia, counseled by Morgan Stanley, faced challenges in its attempt to acquire Arm in early 2022. This unsuccessful acquisition paved the way for Arm's decision to pursue an IPO. (Source)

Arm Cautions of China-Related Risks in IPO Documents

Arm has meticulously outlined potential risks linked to China in its IPO filing. The report elaborates on concerns both geopolitical and economic that might influence Arm's business. Approximately 25% of Arm's revenue originates from China. Its independent subsidiary, Arm Technology Co., stands as the company's largest customer, accounting for nearly 24% of total sales. Adding to the complexity is the majority ownership of Arm China by local investors, coupled with ongoing power disputes with former CEO Allen Wu. Given the recent tense tech relations between the US and China, and the noticeable slowdown in the smartphone sector, there's palpable concern about Arm's revenue prospects in China. Tech juggernauts such as U.S. technology firm Apple and U.S. wireless tech company Qualcomm, which rely extensively on Arm-based processors, have significant stakes in the Chinese market. While Arm is aiming for an IPO valuation between $60 billion and $70 billion, analysts are drawing attention to potential risks from the China front that could impact this. (Source)

Flutterwave Pursues IPO Despite Financial Controversies

Nigerian payment startup Flutterwave, domiciled in Lagos and San Francisco, remains steadfast in its IPO plans amid financial allegations. CEO Olugbenga Agboola has refuted claims regarding the significant impact of former employee complaints on their imminent share sale. With a current valuation at $3 billion, Flutterwave aims to attract a broader global clientele by acquiring public status. The company, which has collaborative ties with international firms such as Alibaba's Alipay and Uber, is contemplating listings in New York and potentially Nigeria, although market conditions might cause delays. Flutterwave faced challenges in 2022 when its accounts were frozen in Kenya, but efforts are in progress to rectify this situation and obtain the necessary licenses. Their payment app, SendApp, witnessed a staggering 23-fold surge in transactions during the first half of this year, indicating robust growth in user engagement. Flutterwave's endeavors to advance its IPO align with its ambitious growth strategy in the fintech sector. (Source)