ALEX BRUMMER: If the post-Brexit Stock Exchange is to have any credibility, it must battle to bring Arm float back to London
When Cambridge-based smart-chip maker Arm Holdings was sold to Japan’s Softbank in July 2016 for £25billion the deal was greeted in government circles with near rapture.
Softbank’s charismatic boss Masayoshi Son was demonstrating that the UK was open for business post-Brexit referendum and assurances were won over jobs and R&D budgets.
Son recognised the intellectual value of Arm’s processor designs which reached to the internet of things. The company’s creation of smart chips would drive Artificial Intelligence (AI).
Chips are down: The disappearance of the firm best prepared to be Britain’s tech champion into a speculative overseas holding company was a terrible mistake
The disappearance of the firm best prepared to be Britain’s tech champion into a speculative overseas holding company was a terrible mistake. Arm is a product of the UK’s world-class research universities and held intellectual property and patents nurtured by the British taxpayer through the education system. No other Western democracy would have let such technology disappear abroad with minimum scrutiny.
Arm’s ‘systems on a chip’ (SoC) has developed into a £80billion global market. Plans are reportedly afoot to restore the British firm to a public listing with Goldman Sachs leading the drive.
Softbank’s ownership has been far from smooth. A chunk of equity went to Son’s Vision Fund in which Saudi Arabia holds a big stake, and Softbank sold 51 per cent of Arm’s profitable China offshoot to Chinese partners for £615m. Beijing was getting its hands on valuable Western technology on the cheap. If Arm’s owner had been American, the deal would have been blocked.
Softbank is seen as a highly indebted deal maker overloaded with duff investments. Most fraught has been its exposure to tech-property wunderkind WeWork which nearly collapsed. Softbank has recently made disposals to raise cash to erase a debt mountain and fund buybacks. Amid the turmoil, Arm has moved back to centre stage.
It recently emerged that the firm was ‘restructuring’ and two enterprises, IoT Platform and Treasure Data. were being transferred into new entities operated by Softbank. Each of the deals betrayed pledges made that the company would benefit in R&D and employment under Softbank management. Instead it has gradually been denuded of people and businesses.
Nevertheless, what is left is valuable. Arm has a monopoly in processor designs for systems on the chip.
Apple is among a number of companies that have switched from Intel on its Mac computer to Arm-designed chips. Arm hopefully is taking suitable precautions given Apple’s reputation for ruthless treatment of suppliers.
When will Arm relist, at what price and on which market? Even in its denuded state, Arm could list as soon as next year at £32billion and attain a value of more than £40billion by 2025. It would be a tragedy if, as a result of naivety in Britain, a triumph of UK tech engineering were to end up with a dominant Japanese shareholding and quoted in New York.
If the post-Brexit London Stock Exchange is to have any credibility, it must battle to bring the float back to London and ensure Arm doesn’t disappear into a Silicon Valley haze. That would be the ultimate insult.