SoftBank Group Corp (9984.T) has postponed its $80 billion blockbuster sale of Arm Ltd to Nvidia Corp (NVDA.O), citing regulatory concerns, and will instead seek to float the firm.
Arm, which appointed a new CEO on Tuesday, announced that it would go public before March 2023, and SoftBank CEO Masayoshi Son suggested it would be in the United States, most likely on the Nasdaq.
In 2016, SoftBank paid $32 billion for Arm, a company whose technology drives Apple’s iPhone and practically all other smartphones.
“It (Arm) had the rare hallmarks of a SoftBank investment turning to gold, but instead Arm will head back for listing in financial markets where tech stocks have been seriously tarnished of late,” Hargreaves Lansdown analyst Susannah Streeter said, adding, “such a bumper valuation is likely to be far from reach.”
The value of the sale, which depended on Nvidia’s stock price, was originally pegged at about $40 billion but rose with Nvidia’s stock price to about $80 billion late last year, though the California company’s stock has fallen since.
The inability to acquire Arm is a missed opportunity for Nvidia, said CFRA Research analyst Angelo Zino, adding that the collapse of the deal removes an overhang on the stock and investors can now “focus on the company’s attractive fundamentals”.
Nvidia’s shares fell 1.9% in trading before the bell.
SoftBank CEO Son attempted to put a positive gloss on the canceled sale during a business earnings calls on Tuesday. Son had previously stated that the company considered listing Arm but decided to sell it instead owing to the pandemic.
He predicted that Arm will drive revolutions in areas like cloud computing and the metaverse and that it would be the most significant IPO in the semiconductor industry’s history.
Nvidia had deposited a $1.25 billion breakup fee as profit in the fourth quarter, which SoftBank said it would recognize.
On a company earnings call on Tuesday, SoftBank CEO Son, who had said the company initially considered listing Arm but opted to sell it instead due to the pandemic, sought to put a positive spin on the scrapped sale.
He said Arm would power revolutions in areas such as cloud computing and the metaverse and that it would be the most significant IPO the chip industry has ever seen.
SoftBank said it would recognise a $1.25 billion breakup fee that Nvidia had deposited as profit in the fourth quarter.