SoftBank launches IPO for Arm after deal with Nvidia

Mr Son sounded like he was on a roadshow for investors at a news conference in Tokyo on Tuesday. He said Arm is entering a “golden period” of high demand for chips it helps to make into smartphones, electric vehicles and computer-server farms operated by the likes of Amazon.com Inc.

The Japanese investment and technology group said the pitch was abandoning plans to sell Arm to Nvidia Corp — in what would be the largest semiconductor deal on record — because antitrust concerns stood in the way.

Mr Son said he was surprised to see the reaction of not only US regulators, who sued in December to block the deal, but also large tech companies that relied on Arm’s chip designs.

“We saw strong opposition because Arm is one of the most important and essential companies that most companies in the IT industry or Silicon Valley rely on, either directly or indirectly,” he said.

SoftBank paid out $32 billion when it acquired the UK-based chip business in 2016. Mr. Son said the sale to Nvidia, under which SoftBank would receive both cash and Nvidia shares, could be worth $80 billion due to an increase in Nvidia’s stock. Price.

SoftBank now plans to push the public listing of Arm until March 2023. Arm shares are likely to be listed on the tech-heavy Nasdaq stock market in the US because many of Arm’s clients are located in Silicon Valley, Mr. Son said.

He said that SoftBank did not intend to hold the arm for itself because he wanted outside investors in the SoftBank-led Vision Fund, which owns a quarter of the arm, to be able to cash in through an IPO and because he wanted the stock. Wanted to give alternative incentives to Arm employees

Uncertainty remains around the Arm IPO, including whether the volatile semiconductor business will continue to heat up this year.

Tech stocks have fallen recently due to the tightening of the Federal Reserve. Fumio Matsumoto, chief strategist at Okasan Securities, said timing is less than ideal for a large IPO, and he also noted that a strategic buyer in the chip industry could pay more for Arm because of potential synergy effects.

Still, Matsumoto said the recession in Silicon Valley provided opportunities for Son as well, and it made sense to raise cash for his war chest from an Arm IPO. “As technology share prices have recovered sharply over the past year, we are looking at a good cycle to consider preparation”, Mr. Matsumoto said.

After a rough patch a few years ago, Arm is on track for revenue of $2.5 billion this fiscal year that ends in March, up from $1.98 billion last year, SoftBank said. Arm’s operating profit more than doubled over the past two years to an estimated $900 million this fiscal year, according to a calculation used by SoftBank.

Consumer electronics companies, including Apple Inc., Samsung Electronics Co. and Qualcomm Inc., as well as a range of semiconductor companies, use Arm’s design in at least some chips. The designs are known for their low power consumption, making them almost ubiquitous in mobile devices.

The breakdown of the arm deal is one of the challenges Mr Son is dealing with in his global investment portfolio. He said “we are in pain” over China’s crackdown on its big tech companies, which affected SoftBank’s investments, including its most valuable e-commerce giant Alibaba Group Holding Ltd.

The last two years have seen some of the wildest ups and downs in the four decades since Mr. Son started SoftBank. The pandemic, which was initially seen as a setback, soon emerged as a boon for many technology businesses in which SoftBank has invested. Shares of SoftBank jumped, having fallen only half from its recent peak when the China crisis and the collapse of the Arms deal.

SoftBank’s net asset value, Mr Son’s preferred measure of the company’s finances, fell to 19.3 trillion in the October-December quarter by 1.6 trillion, the equivalent of about $14 billion. This is a 30% drop from the September 2020 peak and the lowest level since 2017.

Mr Son attributed the sharp fall in Alibaba shares. The Chinese company, which once made up the majority of SoftBank’s net assets, now accounts for less than a quarter of the total.

SoftBank said it unloaded some shares of Alibaba to settle contracts with its lenders, but Mr Son said SoftBank’s stake in the Chinese company remains close to a quarter.

Mr Son, who turns 65 this year, has lost several top lieutenants in recent years, including Chief Operating Officer Marcelo Clare, who stepped down in January following a pay dispute. Mr Son said while he was preparing successors, he did not intend to step down anytime soon.

“If I had stayed, I would have become an old grandfather very quickly,” he said. He claimed that when he went to bowl recently, he had topped 200 points in two separate rounds – a fine score for an amateur. “I thought, ‘Hey, I’m still too young,'” he said.

This story has been published without modification to the text from a wire agency feed