Arm Holdings PLC (NASDAQ:ARM)’s market valuation is expected to top $100 billion (£79 billion) when US markets open on Thursday, thanks to a 27% surge in its share price following a record quarterly revenue result.
That makes for a nearly 100% increase in the British fabless chipmaker’s valuation since debuting on the Nasdaq last September for $54.5 billion.
It also makes for a tripling of its $32 billion valuation from when SoftBank took the firm private in 2016.
As of today, SoftBank remains the majority owner with a 90% stake in the group.
When it floated 10% of Arm on the US stock market, SoftBank received over $5 billion in proceeds.
It’s a welcome success for SoftBank boss Masayoshi Son, whose reputation remains deflated after writing down a $14 billion investment in doomed real estate disruptor WeWork.
Arm’s pre-market rally this Thursday alone means the gain realised on SoftBank’s Arm stake effectively cancels the bruising WeWork writedown.
SoftBank’s corporate strategy is increasingly centring around Arm after selling down its stake in Alibaba, with the chipmaker comprising around a third of SoftBank’s total net asset value.
But with Arm’s valuation sky high, one wonders if SoftBank is tempted to offload part of its stake to realise these attractive capital gains.
Although SoftBank remains under 180-day post-IPO lock-up provision, that’s set to expire next month, opening the opportunity to cash in on Masayoshi Son’s most-prized asset.
On the other hand, SoftBank can borrow large sums of money using Arm shares as collateral (around $8 billion as of 31 December 2023).
Using Arm as collateral, SoftBank will be able to fund future acquisitions.
Meanwhile, comments from SoftBank following yesterday’s quarterly earnings call suggest the group remains bullish on Arm’s prospects.
“We’re realising anew how significant Arm’s presence can be in AI,” chief financial officer Yoshiumitsu Goto said, adding that Son is “busy working on many different ways Arm could be used”.
“Arm is central to SoftBank’s AI strategy,” said Goto.
While these comments suggest that SoftBank remains diamond-handed on its Arm stake, but we could find out how strong its convictions are in March.