Key points:
- Nvidia back out of Arm Holdings acquisition, losing $1.25B in the process
- Arm Holdings’ intellectual property reflects a 90% market coverage
- Will SoftBank file for an IPO now Nvidia is out of the picture?
Chip-maker Nvidia (NASDAQ: NVDA) has announced an official abandonment of its acquisition of Arm Holdings, the silicon ship designer owned by Japan’s SoftBank group. Throwing in the towel after an endless brigade of opposition, the company will lose out on its downpayment of $1.25B, retained by SoftBank as a breakup fee. NVDA stock is currently down 3.8%, with the news not helping the wider tech sell-off.
It’s been a difficult road for Nvidia, facing numerous regulatory blockades across 2021; the UK’S CMA outlined the proposal as problematic in the sense that it suppressed ‘innovation across a number of markets’. The deal was also met with uncertainty from the EU’s antitrust authority, the US FTC, and rung alarms in Chinese company Huawei Technologies on the basis of Arm’s IP.
Looking at the fundamentals of the transaction; it isn’t particularly shocking that the proposed acquisition kicked up a bit of a fuss. Arm’s intellectual property, which corresponds to a market coverage of 90%, is utilized by tech giants such as Apple, Qualcomm, Huawei, and Samsung for the use in their smartphones, so the threat of undermining prominent rivals caused quite a stir.
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So what does this mean for Arm? Well, following the official abandonment of the deal; it’s likely that SoftBank Group will act on the opportunity to maximize revenue potential by opting for an IPO; which would more than likely generate a promising return following the company’s acquisition back in 2016. With such a firm hold on market coverage, it will be worth looking out for an Arm IPO in the near future.
