Company: Arm Holdings plc
Symbol: ARM (Nasdaq)
Description: They architect, develop, and license high-performance, low-cost, and energy-efficient CPU products and related technology, on which many of the world’s leading semiconductor companies and OEMs rely to develop their products.
Shares: 95.5 million ADSs
Price Range: $47.00-$51.00
Trade Date: Thursday, 9/14
Market Cap: $48.2b-$52.3b (Not Including Greenshoe)
Underwriters: Barclays, Goldman Sachs & Co, J.P. Morgan, Mizuho, BofA Securities, Citigroup, Deutsche Bank Securities, Jefferies, BNP PARIBAS, Credit Agricole CIB, MUFG, Natixis, Santander, SMBC Nikko
Co-Manager(s): BMO Capital Markets, Daiwa Capital Markets America, Evercore ISI, Guggenheim Securities, HSBC, IMI – Intesa Sanpaolo, Independence Point Securities, KeyBanc Capital Markets, Loop Capital Markets, Ramirez & Co., Inc., Rosenblatt, SOCIETE GENERALE, TD Cowen, Wolfe | Nomura Alliance
Link to Prospectus: Terms Added: 9-5-23
09/11/23 – 10:00am ET — Arm Holdings plc (ARM) — Channel checks just completed, are currently revealing, according to guidance that the deal is well-oversubscribed. We have heard from multiple sources that the books are closing Tuesday at 4pm in anticipation for a Thursday debut. The message has not been fully refreshed from Monday by the lead left underwriter, Goldman Sachs, at this time. We have heard “rumors” that there “could” be a price range update as early as this morning. If and when that information becomes available…we will update the client base accordingly. At this “moment”, the message is that the deal has no price sensitivity within the range ($47-$51).
Looking at the prospectus, there is $735m worth of anchor orders on the cover which includes the likes of Advanced Micro Devices, Inc., Apple Inc., Cadence Design Systems, Inc., Google International LLC, Intel Corporation, MediaTek Inc.’s affiliated entities, NVIDIA Corporation, Samsung Electronics Co., Ltd., Synopsys, Inc. and TSMC Partners. The company is backed by Softbank who offloaded 25% of the company to its Softbank Vision Fund and placed a $64b valuation on that tranche. Softbank is the source of all the shares and they will be left with a 89.9% stake if the greenshoe is exercised.In the fiscal year ended March 31, 2023, they generated net income from continuing operations of $524 million (Non-GAAP net income from continuing operations of $657 million), compared to $676 million (Non-GAAP net income from continuing operations of $663 million) in the fiscal year ended March 31, 2022. The midpoint of the $47–$51 prevailing range values the company at a 2025 calendar year PE of around 28x versus comps Cadence (37x) and Synopsys (30x). Arm has 96% gross margins and 29% operating margins. What stands out from the online roadshow is the appearance of Nvidia’s CEO (Jensen Huang) who gives Arm a solid stamp of approval and highlights how Arm’s chips are integral in a variety of sectors. Notably, Arm’s CPUs are also integrated into Nvidia’s new “superchip” for data centers. The sentiment on the street from the buy-side is that the deal, while discounted versus competitors, is still “not cheap”. However, with a who’s-who list of strategic investors and the prevailing thought that this deal “cannot fail” given the ramifications of the IPO market…the deal has a positive risk-reward profile. Furthermore, the greenshoe is smaller than then normal 15% which gives credence that Softbank is keeping an eye on making sure the stock is limited. We have heard from our sources that retail will “likely” be participating on a limited basis and possibly at a less than 2% figure. Please monitor for potential information. Rating = 3.
09/12/23 – 10:00am ET — Arm Holdings plc (ARM) — Channel checks just completed, are currently revealing, according to guidance that the deal is multiple-times oversubscribed. The underwriters are guiding pricing to the high-end or possibly above the prevailing $47-$51 range. The books are still closing today at 4pm in anticipation for a Thursday debut. A “cornerstone investor” who was on the fence, Taiwan Semiconductor (TSMC), has reportedly elected to move forward with their $100m investment only further solidifying the offering. The IPO continues to gain momentum into closing and it is our opinion that today’s message will see investors “pile-in” to the deal even more. At this time, we are electing to maintain our ‘3’ rating but given the strength of the channel checks, it would not be surprising to see this deal “perform” like a ‘4’. Rating = 3.
09/13/23 – 10:00am ET — Arm Holdings plc (ARM) — Channel checks just completed, are currently revealing, according to guidance that the deal remains multiple-times oversubscribed. The underwriters continue to guide pricing to the high-end or possibly above the prevailing $47-$51 range. The books are closed. The underwriters have been messaging to clients to “manage expectations accordingly”. As mentioned in our Tuesday message, it would not be surprising to see this offering “perform” like a typical ‘4’ rated deal. Rating = 3.
Arm Holdings plc (ARM) priced its offering at $51 or at the high end of the prevailing $47-$51 range and opened at $56.10 for a gain of 10.0% at first trade.
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