Arm execs to cash in on IPO, but clouds gather over prospects

Critics wondering if SoftBank's being realistic

While there are doubts over how much cash Arm will attract for its public offering, execs at the Brit chip designer stand to benefit dramatically once the sale goes through.

According to The Times newspaper, executives at the Cambridge-based outfit are set to pocket tens of millions of dollars in bonuses from its IPO in New York, scheduled for next month.

Chief among these is the company's US-based CEO, Rene Haas, who is likely to receive cash and shares worth $40 million, while a further $35 million has been granted to two other unnamed executives, it is reported.

Arm filed for its much anticipated IPO on Monday, which is widely tipped to be the most significant US public offering this year, and potentially the largest such move in terms of value for two years. Its owner, Japanese investment holding company SoftBank, is reported to be seeking a valuation for the company of around $64 billion, which is double what it paid for Arm back in 2016.

But there are doubts over whether this is realistic. Judged by an average industry earnings multiple, Arm's value would come in at something closer to $30 billion, the Financial Times reports, or close to what SoftBank paid for it.

It isn't clear exactly how many shares SoftBank will be putting up for sale, in any case. The company has consistently indicated that Arm will continue to be a subsidiary controlled by Softbank, implying that it intends to maintain a majority shareholding itself.

Concerns are also being raised over the chip designer's potential exposure to fallout from the “Chip Wars” the US is engaging in with China. Arm revealed in its IPO filing that a quarter of its revenues come from doing business in China, meaning that it was at risk of any economic or political turmoil there, including tensions between China and the US or UK.

Arm is also seeking to break out of its traditional market, chips for smartphones, as the potential for growth here is seen as limited; consumers are said to be tiring of swapping their handset for a new one every year or two, especially as innovation in smartphone design seems to have dried up.

The company is enjoying some success with chips for automotive applications and datacenter servers, but Arm may not to achieve the same kind of dominance in these markets as it has in smartphones.

Earlier this month, The Register reported figures from Bernstein Research that estimated nearly 10 percent of servers across the world contain Arm processors. However, 40 percent of those are in China, which means this is a revenue source at risk from those geopolitical tensions.

Add to this that Arm's revenue fell slightly during its financial year 2023, to $2.679 billion from $2.703 billion the previous year, and there is much uncertainty over whether the IPO will be a raging success or if investors will give it a lukewarm reception. ®

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