There aren’t many startups going public lately, especially not in the artificial intelligence (AI) field, but those that do go public may see a huge boost because of this year’s generative AI frenzy.
We found two AI companies planning to go public that could be worth checking out — one goes public via a special purpose acquisition company (SPAC) merger, and the other via a traditional initial public offering (IPO).
Arm Ltd.
Arm is a British chip manufacturer and software design company owned by Japanese conglomerate SoftBank. The company’s chips already power billions of electronic devices from Apple, Qualcomm, and AMD.
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Arm filed for an IPO and is planning to list on NASDAQ in September if all goes well. SoftBank aims to list a minority stake in Arm, roughly 10% of it, while retaining the rest. Also, all of the proceeds from the IPO will go to SoftBank, Arm’s filing said.
This IPO is valued at $64 billion, which equals 24 times the revenue or 122 times earnings. That’s more expensive than Nvidia’s forward price-to-earnings ratio of 48 times.
There are also risks with this investment. Arm said in its SEC filing that about 25% of its revenue came from China in its latest fiscal year. This makes it susceptible to geopolitical risks. There already are limitations for chip manufacturers that sell to China, and if things go worse, Arm’s revenue will be impacted.
Another risk is the slowing down of smartphone sales, which is a core market for Arm’s chips. The company reported $675 million of revenue in its latest quarter, down from $692 million the year prior. Also, profit fell by more than 50% in the most recent quarter.
Whether Arm’s AI prospects are enough to get investors excited about its IPO remains to be seen.
iLearningEngines
iLearningEngines is a training provider which describes its focus as “AI-powered learning automation”.
The company said it had $309 million in revenue in 2022, up 42% year-over-year, and over 3.2 million users.
iLearningEngines announced in April that it has entered into a merger agreement with Arrowroot Acquisition Corp. (NASDAQ: ARRW). This is a publicly traded SPAC sponsored by Arrowroot Capital, known for mergers in the enterprise software industry.
The deal values the combined company at $1.4 billion, and it will provide iLearningEngines with $143 million in gross proceeds, some of which will be used for future acquisitions.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
