Arm IPO endangered by China unit's legal issues

AppleInsider

Arms plan for an IPO may already be in trouble before it's even started, as a long-running dispute with its division in China could endanger Softbank's offloading of the chip firm.

Following the failure of a $66 billion acquisition of Arm by Nvidia, owner Softbank intends to spin it off as an independent entity, and list it on the New York Stock Exchange later in 2022. However, problems relating to its unit in China could derail the potential IPO.

Management issues with its Chinese division, including legal activity and a lack of transparency, are causing friction that could put off investors, reports the Financial Times.

The main problem stems from a lawsuit by joint venture head Allen Wu against Arm China, one that aims to get Wu reappointed to the Arm China board. The lawsuit is Wu's third, and was filed in September but wasn't previously reported.

The lawsuits started in 2020, after Arm China's board voted to remove Wu. Despite the vote, Wu refused to step down from the position, and continues to control Arm China.

While the lawsuits are a problem for Arm, there is a lack of detail over Arm China's financials, which could be a bigger issue. As a byproduct of the lawsuits, Arm warned in January that it couldn't verify Arm China's revenue.

In March 2021's annual report, Arm admitted it had concerns about the senior management of Arm China, such as the "appropriateness of payments in 2019 which were previously charged against profits of Arm China."

The difficulty in assessing Arm China's finances is a big problem for the IPO. According to Arm co-founder Tudor Brown, the problem is "a mess by any measure," and needed to be fixed.

"It has to be resolved," said Brown. "You can't do an IPO when 20 percent of the company's revenues aren't auditable."

New Arm CEO Rene Haas expressed excitement about the prospect of independence on February 9, with cloud computing and automotive markets viewed as areas of potentially high demand for semiconductors using ARM's chip designs.

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wood1208

So, who suppose to be the boss of ARM to make the decisions ? Softbank or China's ARM division.

blastdoor

Just fire everyone and shut it down.

tommikele

blastdoor said:

Just fire everyone and shut it down.

What a great idea. You must be brilliant and a world class CEO to have come up with that one.

ApplePoor

Spin that Chine division off and let it sink or float as it's own ship.....

viclauyyc

I think it is easier to hire a hitman than fox these Chinese legal mess. 

spock1234

The problem is that SoftBank transferred all of ARM’s intellectual property to ARM China, to suck up to the CCP. Now there is a dispute on who the ‘real’ ARM is. 

The sale of ARM to SoftBank should never have been allowed. Chip design is crucial to national economic security. Only a greedy fool would hand it over to the Chinese. 

Flytrap

ApplePoor said:

Spin that Chine division off and let it sink or float as it's own ship.....

That may result in fragmentation of the ARM architecture...

GeorgeBMac

I would love to flip this record over and hear the other side.  

There is obviously a lot more to this story/saga.

But then you run up against China itself blocking the IPO out of fear that the U.S. would, once again, declare some National Security bullshit and claim that "ARM technology" is no longer available to Chinese corporations.

tmay

GeorgeBMac said:

I would love to flip this record over and hear the other side.  

There is obviously a lot more to this story/saga.

But then you run up against China itself blocking the IPO out of fear that the U.S. would, once again, declare some National Security bullshit and claim that "ARM technology" is no longer available to Chinese corporations.

Be better educated about ARM China;

https://www.zdnet.com/article/arms-fired-china-jv-head-refuses-to-leave-company-reps-banned-from-company-premises/

The ongoing battle does not just impact the fate of Arm China, but also how investment in China itself may be viewed in the future by foreign companies. Wu is the key representative of the venture and under Chinese law, is able to cling on to his position despite Arm's wish to remove him.  

As the dispute has not led to a peaceful resolution and has now become both public and bitter, this may prompt foreign entities considering entering the Chinese business arena to rethink their positions -- especially if valuable IP is involved. 

The Chinese government has been called upon by both companies to step in. Unless resolved quickly, this may also become a test as to whether or not Chinese regulators are willing to rethink local laws to pacify foreign companies in dispute. 

Is this the same China that had censors blur a globe in a "Friends" scene because Taiwan was shown in a different color?

https://fortune.com/2022/02/14/friends-streaming-china-censored-lgbt-plot-ross-ex-wife/

For example, in one instance, the Chinese version omits Ross’ explanation for his divorce: His ex-wife is a lesbian. In the original episode, Ross tells his parents, “So, here’s the deal: Carol’s a lesbian. She’s living with a woman named Susan. She’s pregnant with my child. And she and Susan are going to raise the baby.” His parents look at each other in shock. 

In China, the scene skips from “Here’s the deal” to the parents looking shocked. 

In another scene, the uncensored version shows a globe in the background. In China, the globe is too blurry to identify clearly. 

The censorship hasn’t been lost on fans. A hashtag on the censorship was viewed more than 54 million times on the Twitter-like Weibo service before it was later removed, CNN reported over the weekend. Comments by viewers on the Bilibili streaming service criticized the changes for rendering plotlines incomprehensible. 

ARM China is a clusterfuck due to China's own policies.