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On 8 February 2022, SoftBank Group’s planned sale of Arm Holdings plc to US tech company Nvidia unravelled amidst fierce regulator and competitor scrutiny across the US, UK, and Europe. SoftBank has since announced plans to take the British microprocessor and software company public in the US, calling London’s attractiveness as a listing venue into question. 

Arm’s significance in the technology industry stems in part from the fact it creates processors that power approximately 95% of smartphones in existence, with customers including Apple and Samsung. Amid concerns around a potential concentration of chip manufacturers in the US and China, in 2021 the UK government referred the deal between Nvidia and Arm for a national security review. 

The effect of the tie up on competition in the global semiconductor industry was also cause for concern. Through its acquisition of Arm, Nvidia would have had access to Arm chip designs before other chipmakers, which and would have enabled it to block other chipmakers from licensing Arm’s designs. Nvidia’s competitors using Arm’s designs would have still been required to pay royalties and licensing fees to Arm, effectively facilitating Nvidia to sell its own Arm-based chips at lower prices.

During a Tokyo news conference for investors following the collapse of Arm’s sale, SoftBank’s CEO Masayoshi Son, aware of the company’s strong position, claimed Arm is entering a ‘golden period’. Son went on to announce the company’s intention for Arm to pursue a public listing by March 2023. In news that came as a blow to the London markets, although no final decision has been made, the company’s shares are likely to float on the tech-heavy Nasdaq, given a significant number of Arm’s clients are based in Silicon Valley. Major tech companies listed on the Nasdaq include Apple, Amazon, Alphabet, and Microsoft, making it an attractive exchange for tech companies hoping to mirror the success of its constituents.   

The January 2022 changes to the Listing Rules alone (see Practice Note: (a subscription to Lexis®PSL Corporate is required)) are unlikely to persuade Arm of the advantages of a London listing. 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, but New York’s attractiveness also stems in part from the likelihood Arm would achieve a higher valuation on the Nasdaq exchange. The London market is perceived to undervalue tech companies and London’s recent history with high-value tech IPOs will undoubtedly have played a part in Arm’s decision-making process. In March 2021, food delivery service floated on the LSE, in what remains the biggest tech IPO ever listed in London. The disastrous IPO saw almost £2bn wiped from its opening market capitalisation of £7.6bn. For more on this, see: .

Notwithstanding Deliveroo’s failed debut, data compiled by Market Tracker 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. However, while this indicates an overall increase in UK tech listings, the statistics represent a stark contrast to Nasdaq’s reported figures of 53 tech company listings in 2021 and 24 listings in 2020.

Despite finding itself in the enviable position of being courted by two high profile exchanges, it is rumoured that Arm’s floatation could be stalled due to a protracted battle with the chief executive of its joint venture in China, Allen Wu. The dispute with Wu means Arm has not been able to verify its revenues from Arm China, which is in turn likely to mean that investors will struggle to value the company, regardless of where it lists. With pressure increasing on the UK to prove it can retain homegrown technology companies, the delay may provide an opportunity for business secretary Kwasi Karting and chancellor of the exchequer Rishi Sunak to lobby Arm on behalf of the London Stock Exchange and win back what it widely viewed by many UK politicians as a national asset.

Market Tracker will explore UK IPO activity during 2021 in more detail in our upcoming Equity Capital Markets trend report.