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An IPO of Arm Holdings plc looks increasingly likely, as its parent company SoftBank Group Corp. on 30 April it had successfully removed a major obstacle to a stock market floatation, relating to a long-running issue with Arm’s Chinese joint venture. SoftBank its intention to float Arm following the February 2022 unravelling of the UK-based chip-maker’s sale to US tech company Nvidia Corp (for further information on this, see: ). However, SoftBank was unwilling to pursue an IPO of Arm whilst issues with the company’s Chinese joint venture were ongoing.

The joint venture’s chief executive, Alan Wu, was removed by SoftBank in June 2020 but refused to hand over documents enabling the appointment of a replacement. Wu also blocked attempts by SoftBank to audit the joint venture’s accounts.  As SoftBank is the minority shareholder in the venture with a 49% stake, they were unable to forcibly remove Wu. Despite this, SoftBank last month that Arm China’s long-running ‘corporate governance’ issue had been resolved, and Dr. Renchen Liu and Dr. Eric Chen have been appointed as the company’s co-CEOs, effective immediately.

As such, there is renewed interest in where SoftBank intends to list Arm, with the UK’s prime minister Boris Johnson said to have sent a letter to SoftBank as part of a last-minute attempt to keep the British company from pursuing an IPO on the Nasdaq, thought to be SoftBank’s favoured listing venue. Johnson’s involvement is a bid by the government to stem the bleeding of UK companies seeking to list elsewhere despite the January 2022 changes to the Listing Rules (see Practice Note: (a subscription to Lexis®PSL Corporate is required)). As part of the changes, amendments have been made to the FCA Handbook to reduce barriers to companies listing in the UK and to encourage private companies to list at an earlier stage.

London does not have a strong reputation as a listing location for technology companies, and those who do choose to list in the city have received a lukewarm response from investors.  Cyber-security firm ’s May 2021 IPO saw its share price surge, only for it to be ejected from the FTSE 100 following fading investor interest. Currently, the FTSE 100 remains light on technology companies, with the majority of its constituents still being made up of those operating in traditional industries such as banking, investment, and oil and gas.

Market Tracker data indicates that investor appetite for tech stocks is on the rise. In 2021, 15 tech companies completed London IPOs, a steep jump from only two in 2020. Nonetheless, these figures are in stark contrast to Nasdaq’s reported figures of 53 tech company listings in 2021 and 24 listings in 2020.

Arm’s potential listing on the Nasdaq is concerning for the UK government, which is increasingly concerned with technological sovereignty. Should SoftBank insist on a New York listing, it is believed the UK government will push for Arm to be co-listed in both New York and London. Estimates suggest Arm could be worth approximately £32.1bn, making it an appealing target for listing venues, irrespective of its status as a technology company.

Market Tracker will continue to monitor Arm’s proposed IPO.