Amazon in talks to become lead investor in Arm’s IPO

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SoftBank is in talks to tap Amazon as a lead investor in Arm’s upcoming initial public offering as part of a broader search to find customers willing to take a long-term stake in the chip designer based UK.

The Japanese conglomerate, which acquired Arm in 2016, has stepped up efforts over the past month to find top investors for the Cambridge-based company’s listing on New York’s Nasdaq, according to two advisers familiar with the talks. .

Although the talks initially focused on Nvidia, Intel and other chipmakers, two people familiar with the talks said they have since spread to Google, Apple, Amazon and companies in other industries heavily dependent on semiconductors. The same people said these would likely include the automotive and industrial automation sectors.

“Every large technology company that is a customer of Arm or that relies on Arm technology is presented with this opportunity. Amazon is one of them. . . About 10 ago [potential investors] which are not public,” said a person familiar with the situation.

SoftBank, Arm and Amazon declined to comment. Reuters first reported on Amazon’s talks of an anchor investment.

Through its Amazon Web Services arm, the Seattle-based company is one of the world’s largest cloud computing providers alongside Microsoft and Google. Like its Big Tech rivals, Amazon has decided to design its own chips to power its data centers. However, Arm has also developed a new line of server chips in an effort to capture a bigger share of the data center market.

A top anchor investor in the potential slate, which is expected as early as September, would help bolster Arm shares as SoftBank sells its stake in the company. The move is also intended to bolster IPO demand following a slowdown in new listings.

Long-term investors in SoftBank believe the loss-making tech conglomerate, which was founded by Masayoshi Son and recently declared itself in ‘tort mode’ after being hammered by the global tech downturn, is looking to list Arm with a stock market valuation. at least $60 billion. .

But a person familiar with talks with Nvidia about being a lead investor said the US chipmaker had suggested a stock price that put Arm’s total value at $35 billion to $40 billion, while Arm wanted to be valued at over $80 billion.

“The possible presence of some big names like Apple and Samsung as lead investors in Arm could show SoftBank’s broader reach, and they could help establish a valuation for the IPO,” said Richard Kaye, portfolio manager at Comgest and long-term holder of SoftBank Stock.

Arm’s customers span a wide range of industries and often collaborate with the group to develop chips for products such as smartphones and electric vehicles. The e-commerce, electronics and automotive sectors are all heavy users of chips, and Arm’s customers range from automaker Nissan to Google, Microsoft and Samsung.

“[Arm] cast a wide net,” said a SoftBank adviser. “We may end up with just one or two lead investors, but right now it’s a long shortlist of candidates.”

Kirk Boodry, a SoftBank analyst at Astris Advisory in Tokyo, said it was natural for Arm to broaden its search for anchor investors, given the enormous importance of a smooth IPO.

“They want to be sure that listing is going well, and that’s probably more important than the valuation,” said Boodry, who added that the prospects for success were good and that Arm had a long track record presenting the issue. company history to investors.

“The more companies you onboard, the more stable the supply. The less extreme the valuation, the longer the list of core investors you have. It’s a balancing act,” Boody said.

SoftBank said on Tuesday that a slowdown in the global semiconductor industry, with consumers spending less, sent Arm sales plummeting for the three months ending June 30, but the group had signed “agreements milestones with companies developing chips for future smartphones, automobiles, in-vehicle applications and AI.”