Hard as it may be to believe given how downtrodden it is now, Japan's SoftBank was once regarded as a formidable presence on the global technology stage. Sure, it always carried a fairly high level of debt, but its principal Masayoshi Son was regarded as an Asian tech visionary in the mold of a Bill Gates or Steve Jobs. Just as Japan, Inc. gorged on buying US properties in the 1980s, SoftBank gobbled global tech shares in the 2000s, culminating in the creation of Vision Fund for venture capital. Launched in 2017, the Vision Fund's losses have dragged down Softbank as of late. Casting such a wide net, some purchases were bound to be successes (like Alibaba) while others were duds (like WeWork). Unfortunately, it seems SoftBank has had more of the latter than the former.
Arguably SoftBank's crowning purchase was the UK's ARM Holdings for $32 billion in 2016. Based in the college town of Cambridge, ARM licenses leading-edge microchip designs used in almost all of today's smartphones. Such licensing revenue is huge. However, ARM has been shopped around for a number of years now to help resuscitate its parent company's finances.
From an international political economy standpoint, what is interesting is that ARM has chosen not to make its initial public offering (semantically a re-offering) on the London Stock Exchange where it was listed prior to SoftBank's 2016 purchase. Spurning national pride, it has chosen to list in the United States. So much for UK government entreaties to lure ARM back home, at least financially:
“After engagement with the British Government and the [Financial
Conduct Authority] over several months, SoftBank and Arm have determined
that pursuing a U.S.-only listing of Arm in 2023 is the best path
forward for the company and its stakeholders,” Arm CEO Rene Haas said in
a statement. Arm did not completely rule out the possibility of
listing in London in the future, saying it was “proud of its British
heritage” and may consider a subsequent listing in the U.K. at a later
date. It provided no further details.
The decision comes despite
intensive lobbying efforts by the British government to persuade the
chip designer to list its shares in the U.K. capital. With 6,000 staff
globally and 3,000 based in the U.K., Cambridge-based Arm is widely
regarded as the jewel in the crown of the British tech industry.
The
company is a major force in the semiconductor market, licensing its
microchip designs to some of the world’s largest consumer tech
manufacturers. Around 95% of smartphones globally, including the Apple
iPhone, contain Arm-based processors.
London
has relaxed its listings rules in an effort to attract leading global
tech companies to go public in the U.K. It faces barriers, with venture
capitalists complaining of a lack of understanding of often loss-making
tech ventures.
Although the soon-to-be defunct Softbank-ARM linkup has many interesting
angles to it, there are two of particular note here: The fall of
Masayoshi Son who though the world was his (tech) oyster is one. Another is the London Stock Exchange's
inability to attract tech IPOs. With many of its listings consisting of
traditional industries like energy and finance, the UK reputation as an investment destination for technology could literally
have received a shot in the ARM. But alas, it has just been announced that ARM will soon list Stateside a few weeks after the UK was spurned:
SoftBank Group Corp's chip maker Arm Ltd has filed with regulators confidentially for a U.S.
stock market listing, Arm said on Saturday, setting the stage for this
year's largest initial public offering. The
IPO registration shows that Softbank is pressing ahead with the
blockbuster offering despite adverse market conditions, after saying in March that it planned to list Arm in the U.S. stock market.
U.S.
IPOs, excluding listings for special purpose acquisition companies, are
down about 22% to a total of just $2.35 billion year-to-date, according
to Dealogic, as stock market volatility and economic uncertainty put
many IPO hopefuls off.
Arm plans to sell
its shares on Nasdaq later this year, seeking to raise between $8
billion and $10 billion, people familiar with the matter said. In a
statement, which confirmed an earlier Reuters report on the planned IPO,
Arm said the size and price range for the offering has not yet been
determined.
The Matthew Effect is alive and well in tech, I guess. Given the UK's self-inflicted harm over Brexit, it is not unexpected that one of its national champions would prefer to list in the capital- and tech-intensive United States which already has many of tech's top firms. Maybe the UK will get a consolation prize of a secondary listing a few years down the road, but for now, it has come up empty.
5/19 UPDATE: The ARM sale probably couldn't come sooner as the SoftBank Vision fund has just announced a scarcely believable $39B loss.