Managers are delaying much-anticipated plans to list British chip designer Arm on the stock exchange because they are concerned that the global economic downturn and a slump in tech shares will frighten potential investors.
The Cambridge-based company recently informed private shareholders that the initial public offering (IPO), which could value the company at up to $40 billion (£34 billion), would not take place until well into next year. The company was widely anticipated to go public as early as the first quarter of next year.
The delay will cause concern among UK ministers, who have lobbied the company to list on the London Stock Exchange in order to secure the City’s reputation as a potential destination for high-profile tech IPOs over competitors such as New York.
“Clearly, we want to IPO as soon as is possible. But given the current global economic uncertainty, given the state of financial markets, that’s probably now unlikely to happen before the end of March 2023,” Ian Thornton, Arm’s head of investor relations, told investors.
“However, preparations for the IPO are going very well. They’re advanced. And we are fully committed to floating sometime in 2023,” he added. A spokesperson for Arm confirmed the delay.
The Mail was the first to report the delay on Sunday.
Analysts previously estimated that Arm, whose chip designs are used in products ranging from iPads and mobile phones to cars and smart TVs, could be worth up to $40 billion when it goes public. However, shares in major technology companies such as Facebook’s parent company, Alphabet, and Amazon have fallen this year amid concerns that rising inflation, rising interest rates, and economic uncertainty will harm consumer demand and advertising revenues.
These same circumstances, precipitated by Russia’s invasion of Ukraine and subsequent rise in energy prices, have raised fears of a global economic downturn.
According to the Office for Budget Responsibility, the UK has already entered a recession that will last more than a year and force half a million people out of work.
The postponement of Arm’s IPO will put additional pressure on its owner, SoftBank, which purchased the chip company for $32 billion in 2016 but has struggled with a string of bad investments.
This summer, it was revealed that then-Prime Minister Boris Johnson joined lobbying efforts already underway by London Stock Exchange executives, government departments, and senior officials to persuade Arm to float its shares in London.
Liz Truss attempted to resurrect those discussions before stepping down as Johnson’s successor last month.
(Adapted from TheGuardian.com)