This should be a momentous day for investors in
SoftBank
Group.
Arm Holdings,
the U.K.-based chip design firm that is the SoftBank’s largest single holding, came public on Nasdaq at $51 a share, and closed up 25% to $63.59.
And yet, investors don’t seem to be giving Arm’s primary owner any credit—American Depositary shares of SotfBank were up just 1% on Thursday.
For SoftBank (ticker: SFTBY), it’s a huge win: the company gets all of the proceeds from the offering and creates a way to monetize the rest of the business—SoftBank continues to own about 90% of Arm.
At today’s close, Arm (ARM), on a fully diluted basis, is worth $67.9 billion, which makes SoftBank’s remaining stake worth roughly $61 billion. That’s equal to about 91% of SoftBank’s current market capitalization of about $67 billion.
Put another way: Arm ‘s market cap is about even with SoftBank’s, despite the fact that SoftBank has other assets, including its control of the giant Vision Fund venture capital portfolio. SoftBank shares almost always trade at a significant discount to the company’s net asset value, generally around 50%. It’s nonetheless surprising that SoftBank shares barely moved on Thursday.
SoftBank acquired Arm in 2016 for $32 billion. A deal to sell Arm to
Nvidia
(NVDA) for $40 billion in cash and stock collapsed in early 2022 in the face of stiff opposition from regulators. SoftBank immediately said it would refocus on taking the company public—and today, the plan has paid off.
In an interview with CNBC aired Thursday, SoftBank CEO Masayoshi Son said that the company intends to own as much of Arm as it can for as long as possible, with no near-term plans to sell more That may be one reason for the muted reaction in SoftBank shares—the modest windfall from the IPO proceeds is nice, but the real test of its Arm plan will come over time.
Write to Eric J. Savitz at [email protected]
Read the full article here