1. Analysis
June 24, 2022updated 28 Jun 2022 8:14am

UK gov trying to force Arm London IPO “smacks of utter desperation”

The UK government is growing "desperate" in its attempts to force Arm to list in London, analysts say

By Eric Johansson

The UK government’s attempts to force chip maker Arm to float in London is growing desperate, according to analysts.

The comments come after reports in the media that government officials considered raising national security concerns to twist the arm of the chip designer to ditch an initial public offering (IPO) in New York and float in London.

“This smacks of utter desperation on the government’s part. It’s unclear whether the suggested use of the National Security and Investment Act would even apply to an IPO,” said David George, service director of thematic intelligence at research firm GlobalData, in a new podcast.

He added that the move would also run counter to Britain’s post-Brexit agenda.

“To threaten companies with national security laws when the government is trying to make the UK a more attractive place to list is massively counterproductive,” George argued. “Most companies would run a mile from a country whose government adopts this approach.”

The UK has not acted on the idea that it would use national security concerns to influence Arm to list in London.

Latest development in a long story

SoftBank, Arm’s owner, announced it would take the chip designer public in February. The decision came after the $50bn mega-deal to sell Arm to Nvidia imploded 18 months after it was first been announced in September 2020.

The pressure from regulators had become too much for both parties. Market watchdogs and government officials had raised concerns about everything from anti-trust to national security concerns.

These concerns were somewhat well-founded given the chips designed by Arm can be found in virtually every smartphone on the planet. So some British bureaucrats must’ve sighed in relief when the deal imploded.

However, they soon had reason to be worried again. Contrary to the will of the Boris Johnson government, Arm didn’t seem willing to file for an IPO in London. Instead, it seemed dead set on floating in the Big Apple.

This would’ve been another setback for a Conservative government already wounded by the Partygate scandal, accusations of corruption, Tory members of parliament watching porn in the House of Commons, and setbacks in local elections.

Arm opting for a New York IPO would also be another sign that tech startups continue to reject London as a place to go public. That would be despite chancellor of the Exchequer Rishi Sunak having overhauled listing rules to make London floats more palatable for tech companies.

However, these changes and an intervention from Johnson have seemingly not deterred SoftBank from taking Arm public Stateside later this year.

There’s a slim chance that SoftBank may change its mind. Masayoshi Son, chairman and chief executive of SoftBank Group, told shareholders this week at the investment Goliath’s annual meeting that London is still in the running, but that the US’s tech-focused Nasdaq is still his “main preference” for the Arm listing.

The UK government is getting “desperate” about Arm listing in London

It is against this background that the news emerged this week that the government is considering blaming national security concerns to force Arm to list in London.

“The government is now resorting to desperate measures to ensure that Arm remains a UK success story,” said David Bicknell, principal analyst at GlobalData, in the podcast.

He argued that the government has fundamentally misunderstood what SoftBank’s goal is when it comes to listing Arm in New York rather than in London.

“SoftBank’s sole focus is achieving a successful listing at a targeted valuation of $50bn,” Bicknell said. “That remains most likely in New York, where semiconductor companies like Qualcomm and others can consider investing in Arm.”

Arm co-founder Hermann Hauser echoed the sentiment in an interview with UK Tech News this week. He said the UK government should have taken a golden share in semiconductor designer Arm “a long time ago” and any attempt to do so now is “trying to close the gate after the horse has bolted”. He also slammed British politicians as “technologically illiterate”.

Speaking of Qualcomm, the CEO of the American semiconductor company recently floated the idea that Arm could be bought by a conglomerate of chip companies to avoid anti-trust concerns.

“There would be more likelihood of buy in from US tech investors for a US-based listing,” Bicknell said. “That would put Arm in the hands of chipmakers, which is right where it should be.”

“The best the UK government can hope for is a secondary London listing,” Bicknell concluded. “But stamping its feet and trying to strongarm SoftBank is the wrong way of going about it.”

GlobalData is the parent company of Verdict and its sister publications.