SoftBank aims to buy remaining Vision Fund stake in Arm, report
The Japanese investor currently holds a 75% stake in Arm
SoftBank Group is currently in talks to buy the remaining 25% stake in British chip designer Arm Ltd from its Vision Fund 1 (VF1), ahead of Arm's much-anticipated IPO, according to Reuters.
SoftBank currently holds a 75% stake in Arm.
Should the discussions between SoftBank and VF1 result in an agreement, major investors within the fund, such as Saudi Arabia's Public Investment Fund and Abu Dhabi's Mubadala, stand to gain a substantial return, Reuters said. These investors have faced losses after many of SoftBank's investments in startups experienced setbacks.
In the event that SoftBank does not proceed with buying the remaining stake, selling VF1's Arm shares on the stock market post IPO might necessitate a time frame of one to two years, raising the risk of a decline in the chip designer's share price.
SoftBank CEO Masayoshi Son has enlisted the services of investment bank Raine Group to provide guidance to SoftBank during the negotiation process. Additionally, he has refrained from participating in VF1's discussions regarding this issue, allowing the fund to independently arrive at a decision that aligns with the best interests of its investors.
The negotiations are being overseen by VF1's investment committee and SoftBank's investment advisory board, which includes participation from representatives of fund investors.
In the deal is agreed, SoftBank would likely reduce the number of Arm shares being offered in the IPO, potentially maintaining a stake ranging from 85% to 90%, Reuters sources said. However, the sources cautioned that it is possible that no agreement is reached.
VF1, a $100 billion investment fund established by SoftBank in 2017, reported a gain in investments in its latest quarter, marking a significant rebound after the considerable losses incurred by companies within its portfolio over the past 18 months.
Arm's long-anticipated IPO
SoftBank is gearing up to finally unveil the long-anticipated IPO for Arm Ltd, with a potential launch as early as September. This IPO is anticipated to be the biggest of the year on Wall Street, aiming to secure $8 billion to $10 billion at a valuation of $60 billion to $70 billion.
Several prominent tech firms, including Amazon, Intel, Alphabet and Nvidia, are being considered as potential anchor investors for Arm's IPO.
Arm aims to fortify its relationship with key clients and enhance the attractiveness of its IPO by enlisting cornerstone investors, a move intended to bolster its standing, as per one of the sources.
SoftBank's initial intention to sell Arm to Nvidia collapsed in February 2022 due to regulatory hurdles. In response to the termination of the sale, SoftBank disclosed plans for Arm to go public within the fiscal year concluding on 31st March 2023. However, this timeline encountered delays attributed to deteriorating economic and market conditions.
British government officials and senior London Stock Exchange executives attempted to encourage Arm's leadership to opt for a listing on the UK stock exchange. However, earlier this year, Arm announced it would pursue an IPO on a US exchange.
Arm's IPO would not only benefit VF1 but also provide a positive outcome for SoftBank.
SoftBank recently disclosed its third consecutive quarterly loss, which was influenced by drops in the valuations of major holdings such as Chinese e-commerce firm Alibaba Group, German telecommunications company Deutsche Telekom, and US wireless carrier T-Mobile.