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Arm Sale Collapse Costs SoftBank Billions

At A$92.35 million, SoftBank’s sale of chip designer Arm to U.S. giant Nvidia was set to be the biggest deal in the semiconductor sector’s history – almost doubling the A$43.9 SoftBank paid for Arm in 2016.

With that dealing falling apart last week, after intense regulatory scrutiny, SoftBank may instead struggle to break even, as it looks to take Arm to an IPO.

“Arm’s second phase of growth is about to begin,” SoftBank founder Masayoshi Son said this week. “I believe it will grow explosively.”

Despite this confidence, analytics firms and market watchers are less convinced, given Arm’s revenue has risen less than 5 per cent over the past three years.

SoftBank initially decided against an IPO for these reasons – long term investment is required, which Wall Street may not pay heed to.

“We contemplated an IPO but determined that the pressure to deliver short-term revenue growth and profitability would suffocate our ability to invest, expand, move fast and innovate,” Arm’s then-CEO Simon Segars wrote in July 2021.

Following last week’s collapse of the deal, Segars was stood down.

“Although it’s tricky to put an absolute value on [what] Arm could fetch at IPO, it is almost certainly less than Nvidia had earmarked for the ‘Switzerland of the semiconductor industry’,” warns David Bicknell, a principal analyst at GlobalData.

“SoftBank will probably just about break even on the full value of its $31 billion 2016 acquisition.”

 



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