SoftBank drops as US$40b Arm sale prospects diminish

[TOKYO] SoftBank Group dropped for a fourth straight day on Wednesday (Jan 26) following a Bloomberg News report that Nvidia was quietly preparing to abandon its deal to buy Arm from the Japanese investment giant.

Shares were down as much as 2.5 per cent in morning trading in Tokyo.

Initially priced at US$40 billion in September 2020, the purchase has risen in value with Nvidia's shares and has been touted by SoftBank chief Masayoshi Son as a major windfall that would boost his company's coffers and enable more prolific investment in technology startups.

For Nvidia, Arm would be an invaluable strategic asset, as it designs the core processors that power practically every modern smartphone plus a growing array of more powerful electronics.

Regulators across Europe and the US have voiced concern about the deal, adding to a chorus of objection from chip industry players. Companies like Qualcomm, Intel and Alphabet's Google have said that Nvidia can't preserve Arm's independence because it's an Arm customer itself.

Nvidia, the largest maker of graphics chips, competes with Intel in server processors and is expanding into new areas that would put it in direct competition with many other Arm licensees. The US Federal Trade Commission sued to stop the transaction in December.

SoftBank shares hit a 52-week low after a 5.3 per cent drop on Tuesday, driven by a global tech sell-off by spooked investors. The company's investment strategy makes it a proxy for the tech industry as a whole, so its fortunes are heavily dependent on the overall sector's performance. Some within its ranks favour pursuing an initial public offering (IPO) for Arm, according to people familiar with its deliberations.

"There has been scant progress with the procedures related to the acquisition," Citigroup analyst Mitsunobu Tsuruo wrote after the report. "An IPO would delay the monetisation of Arm assets, with uncertainty about the scale of the monetisation also an issue."

BLOOMBERG