Arm , Apple’s chip design partner, plans US stock listing

Apple’s iPhones, Macs, iPads, and other devices all make some use of reference chip designs from Arm, the UK processor design company.

Now the company plans to list its shares on the US NASDAQ stock exchange in a move that once again confirms the poor performance of the UK economy.

Apple and Arm: The back story

Most Apple watchers will remember that Apple, with Acorn and VLSI, was a launch partner for Arm more than two decades ago. At the time, it was to make chips destined for the Apple Newton.

Today, Apple uses Arm reference designs when developing its own chips. You’ll find these processors in iPhones, Macs, iPads, the Apple Watch, Apple TV, and almost certainly inside the company’s mixed reality goggles when they appear.

Arm was sold to Softbank in 2016 for $32 billion. Later, the bank began seeking to divest itself of the firm. But despite the strategic importance of Arm to Apple, the latter declined a chance to purchase the smaller company in 2020, presumably because it felt it would face regulatory opposition if it attempted such a deal.

Softbank then attempted to sell Arm to Nvidia. Regulators in the US, UK, and EU all objected, arguing that such a move would give Nvidia too much market power. The UK Competition & Markets Authority (CMA) warned the deal would, “create incentives to change Arm’s business model and favor Nvidia.”

The deal was eventually abandoned.

Back to the future: Arm will have an IPO

Softbank has confirmed it has “confidentially submitted a draft registration statement” for the listing with the US Securities and Exchange Commission (SEC).

Current reporting suggests it hopes to raise up to $10 billion through the IPO. “The size and price range for the proposed offering have yet to be determined. The initial public offering is subject to market and other conditions and the completion of the SEC's review process,” Arm and Softbank both said in statements.

Arm has been valued at up to $60 billion, so it seems Softbank intends to retain the majority of the company’s stock.

In a press release announcing the deal, it said:

“SBG intends that Arm will continue to be a consolidated subsidiary of SBG following the completion of the proposed initial public offering. SBG does not expect that any such offering would have a material effect on its consolidated results or financial position.”

Another way to bet on Apple’s ascension?

Demand for chips has fallen in response to global economic weakness and dampening PC, tablet, and smartphone sales. IDC recently claimed global smartphone shipments fell 14.6% in the first quarter of 2023, the seventh straight quarter of decline.

It is notable that while Apple is experiencing the same challenges, it doesn’t appear as ravaged by market weakness as most of its competitors. What this means, of course, is that Apple and Apple related companies look to be bright spots in a weak market.

With that in mind, Arm’s IPO is likely to be of global interest and may be the biggest share offering of 2023, in part because it might give canny investors another way to turn a dollar on the relative health of the Apple economy.

More broadly, the US IPO of a key UK tech firm testifies to the failing post-Brexit UK economy. Clearly, Softbank doesn’t see much value in an unstable currency, which fell to record lows under the guardianship of short-lived UK Prime Minister, Liz Truss. That kind of mismanagement may have become a red flag to billion-dollar firms seeking safe haven. This certainly seems to be the case here as the UK’s leading tech firm effectively becomes US-owned.

What about Apple?

For Apple? I’d be very surprised if some of Apple’s wealthiest investors fail to also invest in Arm. Will Apple take a position? I think it will want to have some kind of table stake, given the strategic importance of the company. Though it is reasonable to speculate that Apple’s own processor design teams may be developing contingency plans for completely unique chips, given the company’s continued desire to own the core technologies in its products.

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