Financial red tape blamed for London losing Arm IPO

Chip outfit reportedly afraid it would have to report any transaction with a SoftBank company to UK regulator

Arm's decision not to list on the London Stock Exchange for its public offering is being blamed by some on financial rules, or rather on the UK's Financial Conduct Authority (FCA) not being sufficiently flexible in waiving those rules.

The chip design outfit announced last week that it had decided to list its shares only on New York's Nasdaq for its IPO, despite efforts by the British government to have it dual-list at the London Stock Exchange because Arm is seen as one of the UK's great technology success stories.

It appears that the finger of blame is being pointed at financial regulations regarding the reporting of related party transactions, which Arm was concerned would require it to report to the FCA on any dealings it had with its parent company SoftBank, or any of the myriad other companies in which SoftBank has a significant stake.

These rules were regarded by Arm as onerous and are supposed to have been a crucial reason behind Arm's decision, according to a report in the Financial Times citing anonymous sources familiar with the matter.

Other reports surfaced last month with a similar story about the rules covering related party transactions. The Guardian newspaper stated that the FCA had taken the unusual step of offering to ease the rules for Arm to smooth the way to a London listing.

However, it appears not to have been enough as one of the FT's anonymous sources claims that the FCA had been "asked to think big but thought small," although the paper goes on to point out that there is a limit to what rules can realistically be waived, especially as many of these regulations have been put in place to protect investors.

We asked Arm if it could confirm whether the FCA rules identified had been a factor in its decision, but the company declined to comment.

This is also likely to be only one of the reasons behind Arm's decision to list on the Nasdaq for its IPO, and chief executive Rene Haas said that the company has not ruled out listing on the London Stock Exchange in future.

Other reasons have been put forward for Arm going cool on the UK, including the government's lack of a coherent technology strategy, and the chaotic political environment over the past year or so, such as the disastrous mini budget during the short-lived premiership of Liz Truss.

Gartner vice president for semiconductors and electronics Richard Gordon told us last week that it was more likely to be about financial market considerations, with easier access to funding for Arm in the US markets.

Arm is likely to aim to raise at least $8 billion from the IPO, according to the latest reports over the weekend. The company is expected to submit paperwork for its initial public offering in late April, but the exact timing of the IPO itself will depend on market conditions.

According to Reuters, SoftBank has picked four investment banks to oversee the public offering, naming Goldman Sachs, JPMorgan Chase & Co. and Mizuho Financial Group as those expected to take part, although these outfits were identified almost exactly a year ago as those likely to be underwriting the IPO.

Current estimated valuations for Arm vary between $30 billion and $70 billion, as we reported last week, which would make the IPO one of the largest in the US in recent years. ®