Arm’s China subsidiary plans its own IPO
The breakaway Chinese subsidiary of processor IP developer Arm Ltd. is planning its own initial public offering of shares on a Chinese stock exchange, according to the South China Morning Post (SCMP).
ARM Technology China Co. Ltd. has been acting independently of Arm for many months (see Reports: ARM China makes independent move in autonomous driving). Now the controversial CEO, Allen Wu, has told the SCMP that it wants to launch its own IPO on either the Hong Kong or Shanghai stock exchanges after 2025.
Wu is a controversial figure because in June 2020 Arm and other shareholders in Arm China voted to replace him and he has simply refused to leave.
Wu has now spoken out welcoming the collapse of the sale of Arm Ltd. to Nvidia and welcoming the current plan of record, an IPO by Arm Ltd.
Arm China supplied Huawei
“We are supportive of Arm’s IPO. We hope that Arm would also support ours,” the SCMP quoted Wu as saying. Wu is also quoted saying he clashed with Arm Ltd. over US-sanctions against Chinese communications giant Huawei.
In 2019 the US government told companies with US-origin technology that exports to Huawei required a license. Most technology products were sanctioned (see Report: ARM complies with US trade ban, cuts off Huawei) severly hampering Huawei’s business. The SCMP reported Wu saying he had continued to supply Huawei. “I had a fight with them. They can’t turn away my biggest client because they are afraid of risks due to a political situation. Those are my risks, not theirs,” SCMP quoted Wu saying.
A primary reason Wu has been able to continue in post, against the wishes of the parent company, is that Arm Ltd. only owns a 47.33 percent stake in Arm China. This situation was created when Arm’s parent SoftBank Group Corp. sold the majority share to a Chinese consortium in 2018.
Wu was accused of a conflict of interest over a fund called Alphatecture Hong Kong Ltd., set up by Wu in July 2019 to invest in Chinese startups. Reportedly, Alphatecture offered discounts on Arm IP to startups and to other companies if they would provide money to the venture capital fund, which was effectively his private fund. At the time Wu argued that his actions were known to the board and he had simply taken the initiative in developing the Arm’s ecosystem in China, in-line with company policy.
In concert
With regard to the vote to remove him from office the argument has been raised that minority shareholders acted “in concert” in an illegal way to obtain the 7-to-1 vote.
Wu’s refusal to be sacked has created uncertainty around Arm’s revenues from China and its control of its intellectual property. It is estimated that the Chinese market has been responsible for as much as 25 percent of Arm’s revenue. Arm China has continued to make licensing deals and collect royalties since 2020, but Arm Ltd. has refused to sign-off on the subsidiary’s accounts. Wu told the SCMP that the company generated $700 million in revenues in 2021.
The uncertainty was an impediment to Nvidia’s now-failed attempt to acquire Arm Ltd. and could blight the attempts of SoftBank Group to divest itself of Arm by way of an IPO. SoftBank has said that an IPO of Arm Ltd. will take place in the next year, probably on the New York Stock Exchange.
Related links and articles:
News articles:
Analysis: Arm CEO replaced as ‘unwanted’ sale to Nvidia cancelled
Reports: ARM China makes independent move in autonomous driving
ARM China boss makes $180 million on single deal
ARM’s China struggle threatens $40bn Nvidia deal
Report: ARM complies with US trade ban, cuts off Huawei
Report: VC dealings at heart of ARM’s China trouble
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