Japan’s SoftBank confirmed Tuesday the collapse of a $40 billion deal to sell chip business Arm to Nvidia because of “significant regulatory challenges” over concerns about competitiveness.
Recent speculation by analysts and in media reports suggested that the deal was on the verge of failure following a lawsuit from US regulators and probes in the United Kingdom and Europe.
SoftBank said it now plans a public offering of Arm by March 2023.
The announcement came as the telecoms firm-turned-investment giant reported a net profit of 29.0 billion yen ($251 million) in the third quarter.
It marks a sharp drop from the 1.17 trillion yen logged in the same three-month period in the previous financial year, when results were boosted by huge tech-share rallies.
Tech shares of the kind CEO Masayoshi Son has heavily invested in have taken a beating in recent months on the expectation of higher US interest rates.
These routs led to SoftBank’s first quarterly net loss in 18 months in the previous quarter.
And there have been challenges elsewhere for SoftBank, including losses on Chinese ride-hailing giant Didi Chuxing, which has been hit by Beijing’s regulatory crackdown.
Didi Chuxing has been forced to delist from the New York stock exchange and reported a $4.7 billion net loss in the third quarter.
Chinese giant Alibaba Group, which is SoftBank’s biggest single investment, has also slid in recent months and reports have suggested Son may be weighing unloading some of his stake in the firm.
Son, who has poured money into some of the tech world’s biggest names and hottest new ventures, said in November that Softbank was “in the middle of a blizzard”.
“That ‘blizzard’ probably has room to run, as the usual buy-the-dip mentality that boosted tech over the last two years is less visible,” said Kirk Boodry, an analyst at Redex Research who publishes on Smartkarma.
Hideki Yasuda, a senior analyst at Ace Research Institute, was blunter.
“As SoftBank Group is now an investment fund… its earnings are heavily influenced by the state of the stock market,” he told AFP.
“Now is not a good time for SoftBank Group.”
He singled out the slump in Alibaba shares as particularly damaging for Son, whose strategy of targeting tech firms and start-ups in search of unicorns has been controversial and led to an earnings rollercoaster in recent years.
Last November, Son announced a share buyback worth one trillion yen (then $8.8 billion), reportedly under pressure from shareholders frustrated by SoftBank’s sinking stock price.
But it may now find itself with less cash on hand than anticipated, with analysts predicting that an IPO of Arm would bring in less than the planned sale.
