There is a very good chance that UK chip designs champion Arm will return to the London stock market via a blockbuster IPO (initial public offering) later this year.
Cambridge-based Arm, owned by Japan’s Softbank since 2016, had been lined up for a sale to US computer chip giant Nvidia in a multi-billion deal. But after regulators in the US, UK and Europe, and several of Arm’s customers (Apple, Qualcomm among them) raised competition concerns, Nvidia has now given up and walked away.
The proposed deal would have seen the US firm pay around $66 billion for Arm, a world leader in designing the architecture on which advanced smartphone microchips are based. Softbank paid around $32 billion to take Arm off the London stock market five and a bit years ago.
SoftBank said it would prepare to float Arm within the next year, in what is likely to kick off a charm offensive in London and the US over where the listing takes place.
‘Arm’s processor technology is the world’s most widely licensed and deployed semiconductor design of its kind and is used in virtually all smartphones, the majority of tablets and digital TVs, and a significant proportion of all chips with embedded processors,’ said Softbank in a statement on Tuesday.
PRIDE IN UK ROOTS
Arm has always been proud of its Cambridge roots, where it has its main facilities, and easy access to London made the UK’s stock market ideal. Last month, Hermann Hauser, who spun-off Arm from Acorn Computers in 1990, reiterated a long-held belief that the chip designer would be better off as an independent company listed on the London stock market instead of being taken over by Nvidia.
Hauser did not back Arm’s sale to Softbank in 2016.
LARGE DIY INVESTOR FANBASE
The former FTSE 100 company had been a firm retail investor favourite when it was previously listed in London thanks to a long track record of delivering double-digit returns. Attracting exciting technology growth companies to London’s stock market is a priority for the UK Government which has lifted a number of listing restrictions on new companies in an attempt to pull them to London rather than the US. These have included allowing dual-class stock in some cases and lowering free-float requirements.
Huge demand would be expected for Arm stock from both retail and institutional investors if it decides to re-join the UK stock market, especially given the company’s widened addressable market beyond smartphones.
Softbank’s statement highlighted the work that has gone on behind the scenes since it acquired Arm, increasing investment in research and development, expanding the product portfolio and addressable markets. Arm is now ‘gaining share in fast growing markets such as artificial intelligence, internet of things connectivity, cloud computing, autonomous driving, and the metaverse,’ said Softbank.
‘This has resulted in Arm’s revenues and profits growing strongly over the past two years and provides a foundation for future growth,’ SoftBank’s statement said.
