On April 8th, according to the Nikkei News, British chip design giant Arm has sold its shares in its Chinese joint venture Arm Technology.Transferred to a company jointly owned by Arm and Japan’s SoftBank Groupa move that could speed up its plans to go public.
After that, Arm will continue to hold the shares of Arm Technology through the company after the share transfer, and the transferred company does not have the purpose of issuance.
As early as July 2016, SoftBank acquired Arm for $32 billion, which was also the largest overseas corporate acquisition by a Japanese company at the time.
Previously, Nvidia announced plans to acquire Arm in 2020, but this year the deal was declared aborted due to regulatory audits. In February, SoftBank Chief Executive Masayoshi Son said Arm was “most likely” to list on Nasdaq in New York after Nvidia abandoned plans to buy the company due to “significant regulatory challenges.”
Arm transfers all shares of Amou Technology
In June 2020, Amou Technology suddenly had a power grab. Arm, based on the “Articles of Association” and “Joint Venture Contract”, internally relieved Arm Technology Chairman and CEO Wu Xiongang as a director and chairman of Arm Technology, but Wu Xiongang refused to accept this resolution. After the two sides each issued several statements and confronted each other in the air, there was no follow-up to the dispute.
However, according to foreign media reports, in the past two years,Arm has been struggling to gain control of Arm Technology.
Foreign media once issued a document saying that Arm cannot audit the accounts of Arm Technology, and the lack of transparency of the financial situation of a key business unit may make it difficult for investors to value Arm’s business, thus becoming an obstacle to Arm’s IPO. A spokesperson for Arm Technology responded that they will continue to provide financial information to Arm and are a key contributor to Arm’s business growth.
Under the Foreign Company Accountability Act (HFCAA), the SEC has the power to delist a foreign public company from an exchange if it fails to file reports required by the U.S. Public Company Accounting Oversight Board for three consecutive years, the SEC said.
Therefore, if Arm fails to provide U.S. auditors with access to Arm’s financials, it will expose them to the futureRisks of delisting from U.S. stock exchanges.
In a brief statement to the media, Arm said that Arm’s decision to transfer its stake in Arm Technology was “considering “accounting reason” was made later. Arm also said in a statement that the movewill not changeArm’s role as the primary distributor for Arm to license its IP to Chinese customers also means that it will continue to receive licensing revenue from Arm.
In the statement, Arm did not explain the importance of the accounting issue, but Han Lijie, a partner at Katten Muchin Rosenman in the United States, revealed that Arm transferred the shares of Arm Technology to a special purpose that is not part of the issuance. The company will enable it to indirectly hold shares in Arm Technology. It also means it can treat Arm as an investment rather than a joint venture when reporting its financials.
Han said the move to move the stake to other companies may have been a deliberate choice by SoftBank to deal with the standoff between Arm and Arm.
The legal person of the company has not changed, and the progress of share transfer is unknown
A source told the media that Arm has not discussed share transfers with Arm’s other shareholders or relevant regulators to expedite an initial public offering that could value it at $60 billion. Because if the dispute between Arm and Arm Technology occurs again, it may make investors lose confidence in its listing.
The sources added that SoftBank wants the IPO to take place by the end of March 2023, which means that in accordance with the listing process, Arm needs to complete an audit between June and September this year.
At present, the name of the legal representative of Anmou Technology in the Shenzhen business registration department is still Wu Xiongang, which has not been changed according to Arm’s requirements, and the Shenzhen court has not held a hearing on whether Wu Xiongang can continue to helm Anmou Technology.
In fact, Wu Xiongang still holds the company seal required for the Arm Technology transaction. However, whether the transfer of Arm shares has been approved by Wu Xiongangstill unknown.
Before the transfer, Arm was the largest shareholder of Arm Technology, directly holding its 47.33% stake. Arm CEO Rene Haas said in an interview with the media in February that Arm achieved excellent financial performance in China in 2021, when Arm’s revenue increased by 250% compared to when it was founded in 2018. He attributed the growth to strong Chinese demand for data center and automotive chips.
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