In A Blow To London's Stock Market, This Chipmaker Plans To List Shares In New York

SoftBank-backed company moves across the Atlantic amid geopolitical jostling over semiconductors

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Arm Ltd., a British chipmaker, has announced that it intends to list its shares on the NYSE, a blow to London's stock exchange, and a move that comes during an era of intense competition among the United States, Europe, and China to build out their semiconductor ecosystems.

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It was reported last year that SoftBank Group Corp. 9984 -0.48%decrease had abandoned its plans to purchase Arm from Nvidia Corp. NVDA 0.06%increase in the wake of growing regulatory scrutiny surrounding Arm's dominance in the chip technology that powers a number of the world's mobile devices. After a sharp rise in Nvidia shares, SoftBank's chief executive, Masayoshi Son, at one point valued the cash-and-stock deal at closer to $80 billion after the company initially agreed to a $40 billion price tag.

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Son has long hinted at the possibility of an initial public offering as a backup option and has been talking up Arm in a way that is similar to an initial public offering roadshow. As of yet, however, the venue for the event has not been announced by the company.

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SoftBank was indicating that they were interested in listing Arm in New York, one of the biggest tech hubs in the world. SoftBank has been trying to persuade the U.K. government and its finance officials for some time, according to people familiar with the matter, to list Arm at home as well. Taking the decision to leave London represents a blow to the financial capital as a number of other well-known U.K. companies have recently sought to list on the American stock market.

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There is no doubt that Arm's decision to choose New York over London has been a blow to the British technology industry, as Russ Shaw, the founder of Tech London Advocates, a nonprofit industry group, puts it. “There is some disappointing news for the London Stock Exchange LSEG, which saw an increase of 1.94%, as well as the heritage and future of the U.K. manufacturing industry in terms of semiconductors.”

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The Arm company designs and licenses technology that is found in the chips that power mobile devices and has emerged as a key player in the global chip ecosystem by supplying chips for mobile devices. A growing number of Arm-based PCs are now appearing on the market, putting the company in a position where it had long been the market leader.

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In an interview with Fortune, Arm Chief Executive Rene Haas said that the company had made a strategic decision to list in the United States. After several months of consultation with the British government and the stock-market regulator, the company made its decision.

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It is rumored that Arm plans to keep its headquarters in England, where the company plans to increase investment through the opening of a new site in Bristol and the expansion of its workforce. The U.K. will also continue to be the home of Arm's material intellectual property.

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It is highly likely that Arm will also consider a subsequent secondary listing in the U.K. "We will continue to invest and play a significant role in the British tech ecosystem," said Mr. Haas.  

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The Arm semiconductor business is one of the most important behind-the-scenes businesses in the world. More than 95% of smartphones, including the iPhones that are manufactured by Apple Inc., are powered by Arm-based chips.

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Chip makers and device makers alike have relied heavily on Arm designs, making the company the Switzerland of the chip industry-offering its designs to everyone without favoritism.

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When Nvidia was considering the purchase of Arm in 2020, that reliance was at the heart of some of the antitrust scrutiny that it was subjected to. If the deal goes through, both companies have vowed that their no-favorites approach would not change.

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However, the Federal Trade Commission, a non-profit organization, filed a complaint to block the transaction, alleging that it would give Nvidia unlawful control over the technology and designs that rival companies would use to develop their own competing chips in order to compete with Nvidia. Also, the British antitrust regulator has begun an in-depth investigation into the proposed merger citing concerns regarding both competitiveness and national security. As the regulator had previously said, Nvidia's acquisition of Arm would result in a less competitive environment, less innovation, and higher prices for products in the future. China has also begun examining the deal as well.

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SoftBank announced plans for an IPO instead of the sale, and British officials pushed Mr. Son to consider London for the listing. In areas such as banking, energy, and mining, the London Stock Exchange is heavily weighted against old-fashioned companies. According to those familiar with the discussions, the exchange operator was working with the U.K. government to convince SoftBank to dual-list Arm in London as part of its effort to attract more growth companies to the exchange.

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With the acquisition of Arm, the London Stock Exchange would have been able to reclaim a company that was a mainstay component before SoftBank acquired the company in 2016. Instead of focusing exclusively on U.S. listings, the LSE is betting that the listing will encourage other homegrown and foreign technology companies to list on the LSE as well instead of just focusing on U.S. listings alone.

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As a result of geopolitical jockeying over key supply lines, the planned New York listing comes amid a worldwide surge in interest from governments—as well as investors—in chip-related businesses. China has been reprimanded by the United States government for exporting advanced chips and chip-making equipment to the country and has also made it more difficult for Chinese companies in the sector to hire Americans. There has been an increasing urgency in Beijing to boost its own chip industry as a result of this. Meanwhile, there has been a frenzy of IPOs involving chip-related companies in China, as investors have flooded the market with cash.

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Earlier this week, the U.S. Department of Commerce kicked off the application process for $53 billion of semiconductor manufacturing subsidies under the Chips Act. The industry was forged in the United States but has moved much of its manufacturing overseas over the recent years as it has become more competitive.

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In addition to making public and private funds available for the chip-making industry, the executive arm of the European Union has also introduced plans to provide funding to the sector.