A slight hiccup has occurred ahead of SoftBank Group (SFTBY)-backed Arm Holdings’ initial public offering (IPO). Several investors have raised concerns over the British chip designer’s exposure to China. Arm recently disclosed in its IPO filing that revenue generated from China accounts for one-fourth of its total revenues. As a result of this huge exposure, the company faces several economic and political risks stemming from tensions between China and the U.S.
Furthermore, Arm’s subsidiary, Arm China, which operates without direct oversight from Arm or SoftBank, has also sparked concerns among investors. As a result of the limited control, Arm does not have full knowledge about the Chinese unit’s global customer base.
The results of Arm’s second quarter show the impact of tensions between the U.S. and Beijing. Sales from the Chinese unit declined by 16% year-over-year due to U.S. export restrictions on U.S. microchips and other high-tech items.
2023’s Biggest IPO
Despite all the above concerns, Arm’s public debut is the much-awaited IPO of 2023. The company is likely to be listed on the Nasdaq and trade under the ticker “ARM” as soon as next month.
It is worth mentioning that Softbank has approached some of Arm’s biggest clients, including Amazon (AMZN) and Nvidia (NVDA), to back the IPO. Moreover, Softbank will remain the controlling shareholder of Arm once it goes public. SFTBY shares have risen about 2% in the past five days.
