An ongoing battle with its Chinese business might put Softbank’s plan to sell the semiconductor company into jeopardy before the IPO even begins.
It’s likely that Softbank would spin out Arm and put it up for sale on the New York Stock Exchange later in 2022, after the collapse of Nvidia’s $66 billion takeover bid for the company. However, issues with its Chinese subsidiary might stall the IPO.
According to the Financial Times, management concerns at the Chinese business, including legal action and a lack of transparency, are producing tension and might turn away investors.
Joint venture leader Allen Wu has filed a lawsuit against Arm China, seeking re-appointment to the Arm China board of directors. This is the primary source of the issue. Wu’s third complaint was filed in September, but no one knew about it until now.
Following a board decision to remove Wu from Arm China’s leadership in 2020, the lawsuits began to be filed. As a result of the vote, Wu declined to resign as Arm China’s chief executive officer and continues to hold that post.
Arm’s litigation are a headache, but Arm China’s financials might be a greater one for the company. In January, Arm warned that it couldn’t validate Arm China’s income as a result of the litigation.
Arm acknowledged in its annual report for March 2021 that it had issues regarding Arm China’s top management, including the “appropriateness of payments in 2019 which were previously levied against Arm China’s earnings.”
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The inability to accurately estimate Arm China’s financial situation poses a significant obstacle to the IPO. Co-founder Tudor Brown of Arm said the situation was “a mess by any standard” and that it needed to be solved. Tudor Brown
There ought to put an end to this, says Brown. If 20% of the company’s sales cannot be audited, an IPO cannot be done.
With cloud computing and automotive sectors considered as areas of significant demand for semiconductors employing ARM’s chip designs, new Arm CEO Rene Haas stated his enthusiasm on February 9 about the possibility of independence.