Will SoftBank’s Arm IPO Plans Dissolve? Sale to Nvidia in Question

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Feb. 11 2022, Published 11:22 a.m. ET

Chinese holding conglomerate SoftBank Group (OTC: SFTBY) doesn’t know what to do with one of its assets. U.K. chipmaker Arm had a false start for its IPO and internal struggles got in the way. As SoftBank attempts to sell Arm to Nvidia (NVDA), regulators are putting up yet another obstacle.

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What will come of Arm and its parent firm, SoftBank—whose stock has lost more than half of its value in the last year?

Will SoftBank’s Arm IPO dissolve?

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Source: Getty

SoftBank CEO Masayoshi Son

SoftBank wanted to take Arm public through an IPO. However, the company’s Chinese unit, called Arm China, proved to be a freewheeling unit as internal struggles mounted.

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Arm referred to the issues as “management turmoil” that needed to be resolved before SoftBank would be able to take the company public.

Arm hasn't been able to verify Arm China’s revenues. There's a general lack of transparency between the units, which would make an IPO application extremely difficult.

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SoftBank tried to float Arm to Nvidia and regulators intercepted.

SoftBank attempted to change course by selling Arm to chip maker and NYSE-traded stock Nvidia. The deal was projected to go through for $66 billion.

In the last year, Nvidia stock has been much more successful than SoftBank and grew more than 65 percent. Nvidia's focus on the high-demand semiconductor chip sector has been worthwhile. In contrast, SoftBank’s high-growth tech stock hasn't been successful. From WeWork (WE) to Alibaba (BABA), SoftBank’s quarterly earnings fell 97 percent YoY, according to its latest report.

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SoftBank’s attempt to sell Arm to Nvidia hasn’t been successful. Chinese regulators are inching in on the deal. There have been questions about the float’s intent and anti-competitiveness. China has a keen eye on tech giants and has sabotaged IPOs from the likes of DiDi Global Inc. (DIDI) to halting them completely as we saw with Ant Financial.

What will come of Arm and SoftBank?

SoftBank is likely scrambling to make plans for Arm. The asset holds great potential, but a combination of internal struggles and regulatory hurdles is blocking key pathways.

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Critics say that SoftBank is investing wildly and should become more conservative. However, SoftBank’s impact on the startup landscape in the U.S. and U.K. isn't deniable. Coming out of a record-breaking venture funding year, SoftBank’s next move is crucial. In the meantime, its own stock remains fragile compared to last year’s valuations. A few high-level executives have left SoftBank in the last year, including Marcelo Claure, who left over a pay squabble.

Arm is a valuable resource in a semiconductor-hungry world. However, the disconnect the U.K. headquarters has with Arm China could prove increasingly troublesome down the line. Arm feels committed, though. The company has a new chief executive, Rene Haas.

SoftBank CEO Masayoshi Son said about the new leadership, “Rene is the right leader to accelerate Arm’s growth as the company starts making preparations to re-enter the public markets. [...] I would like to thank Simon for his leadership, contributions, and dedication to Arm over the past 30 years.”

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