Why Did New Jersey And Ohio Join Other States In Banning Tiktok? One of the year’s most notable initial public offerings (IPOs) is expected to be Arm’s listing on the stock exchange in 2023. The time for such a massive public market entry couldn’t be worse.
During one of the most devastating market downturns in recent memory, SoftBank CEO Masayoshi Son is preparing the UK chip designer, which the Japanese company purchased in 2016 for $32 billion.
Last year, the $40 billion acquisition of Arm by US chip maker Nvidia failed due to rigorous regulatory scrutiny. To create revenues from assets that can balance losses in its venture capital business, SoftBank was compelled to reposition Arm for the public markets.
The Financial Times reports that UK Prime Minister Rishi Sunak increased efforts for a dual-listing incorporating London in December, making Arm’s re-listing less sure than SoftBank would want. This led to a struggle with the US over a business regarded as the jewel in the crown of UK technology.
Why Did New Jersey And Ohio Join Other States In Banning Tiktok?
But regardless of the verdict, Arm, a semiconductor company whose exclusive designs are found in the top smartphones and automobiles worldwide, will undoubtedly lose the conflict, making its prospects even less confident in a risky future.
SoftBank’s attempt to list Arm in 2023 (to support its balance sheet problems) may prove to be more complicated than it needs to be due to waning investor interest in speculative tech firms and a severe slowdown in the semiconductor industry.
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Why Is The Ipo Door Still Largely Closed?
Few other privately held digital companies eager to go public are rushing to the market now that the IPO window seems to be almost closed.
According to data from EY, the IPO market last year reversed course following a record-breaking year for listings in 2021. Deal volumes declined by 45% and proceeded by 61% as investors lost interest in more speculative stocks amid rising interest rates.
Doesn’t That Trend Seem To Be Changing In 2023?
After news broke on Saturday that Chinese billionaire Jack Ma would no longer be in charge of fintech behemoth Ant Financial, the company told Reuters it had no intentions to go public.
After Chinese regulators implemented new lending regulations, it could not proceed with its original ambitions to raise $37 billion in an IPO in late 2020 as investors have grown even warier of China’s sneaking engagement in markets that are at their most turbulent in more than a decade, any potential ambitions for an IPO shortly appear to have all but been abandoned.
Others are also passing the time. As the markets go through their turbulent period, few of the West’s tech darlings have explicitly stated their intention to go public, although they have all been topics of discussion regarding tech’s subsequent major IPO in recent years.
Until it was forced to undertake a substantial down round that reduced its valuation from $46 billion to $6.7 billion, there had been speculation of a Klarna IPO. After laying off 14% of its personnel around the end of last year, Stripe, which submitted plans to the SEC to go public in 2021, has been cautious about taking further action.
Another significant company that has been the subject of IPO discussions is Elon Musk’s rocket company, SpaceX. It seems doubtful that a public listing for SpaceX would add to his headaches, given the difficulties he’s experiencing with Twitter and Tesla (though anything is possible with Musk).
Plans to float Arm publicly have already been delayed from early 2023 due to worries about a fear-filled market. However, according to Ian Thorton, head of investor relations at Arm, the firm is still on track for an IPO this year.
“We want to go public as soon as we can. However, given the current status of the financial markets and the state of the world economy, it is now probably doubtful that this will occur before the end of March 2023, “Apparently, the letter stated.
The state of the semiconductor industry, which is in decline, will be Arm’s other hurdle when it goes public in 2023.
Chip stocks, in particular, suffered in 2022 as a result of supply-chain issues and shortages brought on by the Covid-19 epidemic, which showed only a slight improvement for the sector’s significant firms this year.
Many people are still in pain. The South Korean company Samsung said last week that decreasing chip demand, brought on by reduced consumer spending on gadgets and a chip oversupply, caused its operating profitability to drop by about 70% in the fourth quarter.
Meanwhile, Nvidia, a former Arm target, has seen its shares fall due to the US government’s additional license requirements. The company stated in an SEC filing that the licenses would affect $400 million in sales to China in the third quarter of last year.
Such export restrictions have already hurt Arm, as it was revealed last month that the British company could not sell chip designs to Alibaba due to concerns that a license to do so would not be allowed. At a time when they are cutting their budgets, such incidents are likely to frighten potential public investors in Arm.
Some indications are that Arm would be protected from some market turmoil. For instance, thanks to its growing focus on the automotive sector, revenue for its automotive unit has increased by more than twofold since 2020, marking a rare example of sustained demand, according to the Financial Times.
However, it is difficult to ignore that, according to Gartner’s forecasts, chip revenue will decline by roughly 4% in 2023 to $596 billion, placing Arm’s IPO in potentially dangerous seas.