SoftBank eyes additional London listing for Arm’s IPO

SoftBank considered listing Arm in New York, but the UK government is continuing efforts to get the company to list the semiconductor maker in London.

From Nvidia [NVDA] dropped plans to acquire Arm after coming under pressure from UK and European regulators, chip designer owner SoftBank [9984.TYO]pondered the IPO in New York.

“We think the Nasdaq … which is at the center of global high technology, would be the most appropriate,” SoftBank CEO Masayoshi Son said in February.

Son’s plan sent British ministers on a charm offensive to convince the Japanese conglomerate to consider a secondary listing in London. The government is keen to promote the capital as an attractive place for high-growth businesses to set up shop and set up shop.

London tech IPOs raised a total of £6.6bn last year, more than double the £3.1bn raised in 2020. They included the cybersecurity company based on Darktrace artificial intelligence [DARK.L]which debuted in April with a valuation of £1.7 billion, and the Oxford Nanopore biotech [ONT.L], which debuted in September at a valuation of around £2.5 billion. Others include Deliveroo [ROO.L]moon pig [MOON.L] and TrustPilot [TRST.L].

“Efforts have been made to make the London market a hub for technology companies, a sector that is severely underrepresented at present,” commented AJ Bell’s chief investment officer, Russ Mould. “A return of Arm, after delisting necessitated by the group’s 2016 acquisition by Japan’s SoftBank, would be a small step in the right direction,” Mold added.

Son said he plans to sell part of the company’s stake in Arm by the end of the fiscal year in March 2023.

Questions remain

Hargreaves Lansdown’s senior investment and market analyst Susannah Streeter isn’t convinced the charm offensive is working. If the UK fails to persuade local tech companies to sign up here, “it will be a blow to London’s ambitions and it will put pressure on the government to speed up reform”, she said. . Reuters.

Even if London were to secure a secondary listing for Arm, the placement would come with limitations, namely that the chip designer would be excluded from the FTSE 100 index.

There have even been question marks over whether SoftBank should pursue an IPO. The hope was that the sale to Nvidia would raise funds.

Kirk Boodry, technical analyst at Tokyo-based Redex Holdings, told the FinancialTimes in February that the “big question” was “whether SoftBank can reveal the value it hoped to receive from Nvidia” via an IPO.

SoftBank Group owns 75% of Arm, while its Vision Fund owns the other quarter. Falling valuations of tech investments led the Vision Fund to post its biggest ever annual loss of 3.5 trillion yen over the 12 months to the end of March. Overall, the tech conglomerate posted a record loss of 1.7 trillion yen for the financial year.

Importance of industry

Assuming the IPO goes as planned, it is believed that Son will be targeting a $60 billion valuation. “That might sound a bit rich for a company with current annual revenues of just $2.5 billion, but it’s hard to overstate the importance of Arm technology to the semiconductor industry. “said Mike Orme, thematic research analyst at GlobalData.

It was reported in late May that Qualcomm [QCOM] would be keen to acquire a stake in any upcoming IPO as part of a semiconductor consortium.

Qualcomm CEO Cristiano Amon told the FinancialTimes that it would work to maintain Arm’s neutrality. This is the key. Nvidia’s collapsed deal has come under scrutiny over fears it would ‘damage the competitiveness of Nvidia’s rivals by restricting access to Arm’s intellectual property’, according to the UK government .

“This could be the most important event in the semiconductor industry since Intel [INTC]TSMC [TSM]and Samsung [005930.KS] took strategic stakes in ASML [ASML] in 2012 to allow it to bring an extreme ultraviolet chip-making machine to market,” Orme commented.

“As a result, ASML has become the only company able to offer the means to manufacture new generations of the most advanced chips. We are in similar territory here.

The semiconductor sector has underperformed the broader market since the start of the year. The S&P Semiconductors Select Industry Index is showing a negative return of 36.7% through the June 17 close. The S&P 500 has a negative return of 22.9%.

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