London’s too small for Arm IPO, says Hermann Hauser

Boris Johnson and the UK cabinet have begun a last-ditch effort to convince SoftBank, the owner of chipmaker Arm, to list on the London Stock Exchange instead of New York.

According to the FT, ministers and executives from the London Stock Exchange have launched a charm offensive to persuade SoftBank to reconsider its decision to list only on the New York Stock Exchange (NYSE). It is believed that the prime minister himself has written to the executives at SoftBank to try to sway their decision on Arm’s initial public offering (IPO).

“The problem with London is that it is too small for a company the size of Arm,” said Hermann Hauser on the BBC’s Today programme broadcast earlier today (5 May). “A co-listing with New York will be the natural solution. It is how it is, London does not have the analyst cover for technology companies that New York has and, sadly, it does not have the same cachet.”

Hauser said that while Johnson and the majority of parliament are, sadly, “technologically illiterate”, they have woken up to the fact that it is important to support local technology companies with local stock exchanges. But Hauser added: “It’s a little late for a wake-up call – but better late than never.”

David Bicknell, principal analyst in the thematic intelligence team at analytics firm GlobalData, described the UK government’s lobbying effort as “political opportunism”, adding: “The UK government only has its own interests in mind – not Arm’s future. The LSE’s desire to persuade SoftBank that Arm should list in London is understandable, but the chances of that happening are slim. SoftBank will not rethink its New York plans, nor should it.

“At a time when the global tech market is not at its strongest, Arm needs to be able to target the destination where most investors and key semiconductor supporters, such as Qualcomm, are based. That is New York, not London. Following the collapse of Nvidia’s acquisition of Arm, SoftBank needs investment certainty. London may want to be a global hub for tech investing, but it isn’t there yet.”

In March, Bloomberg reported that SoftBank was seeking a valuation for Arm of at least $60bn, significantly higher than the $31bn Nvidia bid, which failed due to regulatory pressure.

During his interview with the Today programme, Hauser said that thanks to Apple M-based hardware, which uses the Arm chip, the chipmaker has now expanded beyond internet of things (IoT) and mobile devices to desktop computing and servers.

“Arm has a 95% market share in mobile phones,” he said. “It is very strong in embedded controllers. Every PC has 10-20 Arms in them as microcontrollers. But few people know that Arm has managed to create a processor that is as powerful as the Intel processors.”

But unlike Intel, he said, public cloud operator Amazon, which has an Arm implementation called Graviton3, pays only “single-figure royalties” to Arm compared with a 60% gross margin to Intel. “They get the most expensive component in their datacentre for half the price,” he added.