Arm liable for $8.5B SoftBank loan if IPO is a no-show

Brit chip designer Arm could be on the hook for an $8.5 billion loan made to its parent SoftBank if the company's initial public offering (IPO) is delayed or canceled. Arm was planned to be floated on the stock market within the fiscal year that ended March 31 2023, but due to various complications this has been delayed and is …

[Roland6]

Given the very sharp practice being exhibited by SoftBank over this, I suggest it is in order for ARM to do a quick and dirty bankruptcy and reappear as ARM 2023 Ltd. Who have taken over assets and staff of ARM Holdings (UK) Ltd. leaving the debts with the bankrupt entity…

As we know this is wholly within UK law, given the number times it occurs and isn’t followed up by law enforcement…

[Charlie Clark]

Got to love capitalism: saddle the acquisition with the debt

Yes, but it's normally the owners, ie. SoftBank, who do this. And they might well still do so: transfer the loan, declare bankruptcy, rise like a phoenix, run away with the cash…

[bazza]

Re: Got to love capitalism: saddle the acquisition with the debt

Does "normally" mean only the owners can, or can the subsidiary break away from the parent without the parent being able to intervene? Thnx!

The latter sounds thrilling!

[Doctor Syntax]

Re: Got to love capitalism: saddle the acquisition with the debt

"can the subsidiary break away from the parent without the parent being able to intervene?"

ARM China seems to have done something very much like that.

[Charlie Clark]

Re: Got to love capitalism: saddle the acquisition with the debt

Isnt' ARM China a joint venture with majority Chinese ownership, as is generally required for big nose companies?

[abend0c4]

If the following is a correct summary:

"to borrow $8 billion, providing 75.01 percent of Arm's shares as collateral"

then it's not an unsecured debt. And the debt isn't Arm's so they can't use it as a basis for declaring bankruptcy.

It would mean that in the event of a default, 75.01% of Arm's shares would become the property of the financial institutions, which would be a sort of IPO by unorthodox means. And one that couldn't really be challenged on either competition or national security grounds: it would just be banks calling in a debt.

[Roland6]

You are probably right and the value of shares in an unlisted company…

Also, it is possible to issue “shares” with differing rights and dividend entitlements….

[pimppetgaeghsr]

So are we saying it is an insurance policy for softbank to IPO ARM at a 10.6bn market cap? I have no idea what the current status is but I recall a fair amount of the ARM shares were passed off to the vision fund, not directly softbank.

[Gene Cash]

I might be tempted to thumb my nose at law enforcement, but I'm sure SoftBank has lawyers from the Inner Circle of Hell, which would be a contingent I would not cross.

[Doctor Syntax]

"However, various investors have more recently valued the company at anything between $30 billion and $70 billion."

All of which just goes to show that a company is only worth what you can sell it for Right Now. If you sell it today tomorrow's value may well be different because tomorrow's Right Now isn't the same as today's.

[Zippy´s Sausage Factory]

Everything is worth only what you can get paid for it. That's often a hard lesson to learn, and I've met quite a few people over the years for whom that's never really sunk in.

[martinusher]

What's this got to do with making chips?

Notice that as soon as the financial types move in the entire focus of the company changes. ARM used to be about making semiconductors. Now this is almost an inconvenient side effect, something that the company does but the financial engineers would be better off without.

Its a good moment for RISC-V -- instead of having to compete head on with ARM they can just cruse through the hole left by ARM self-destructing.

This sort of thing isn't exceptional, either. I've learned the hard way that as soon as the financial types move in the company's days, especially as an employer of engineers, are numbered. Even if engineering isn't closed down directly the financial squeeze on anything that's not involved with finance and C-Suite remuneration makes further work pointless.

[Youngone]

Re: What's this got to do with making chips?

One of the questions I ask at job interviews is about the background of the person who runs the joint.

If it's anything to do with being an accountant I back out straight away. Accountants are important but you should never let one run your business because they know the cost of everything and the value of nothing.

[pimppetgaeghsr]

Re: What's this got to do with making chips?

It is the Gervais principle playing out in real time. ARM is full of middle idiots and self-interested sociopaths at the top. The founders are all out of the picture and it is ripe for looting due to its ability to generate ridiculous amounts of cash with very little engineering effort. You could get rid of 99% of engineers and barely touch the top line on a short term basis. But long term, by the time the pipeline of products is reaching release and all hell breaks loose, the private equity and deutsche bank grifters will be long over the horizon.

I am not saying this is what they will do, but lots of talent is gone by attrition, leaving comfy positions for some engineers to get into management and fancy titles whilst the people doing all the work have under 5 years experience or even graduates.

[pimppetgaeghsr]

I suspect Softbank might be going the way of SVB and FTX