Financial red tape blamed for London losing Arm IPO 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 …
"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."
So Arm or probably Softbank didn't want transparency then? Interesting.
So Arm or probably Softbank didn't want transparency then? Interesting.
But is that unreasonable?
You could say the same for everyone who chose to list other than here.
And, even if you have nothing to hide, would you choose the regime which continually forces you to prove you have nothing hidden or the regime which doesn't, with all the costs of that which hands your competitors choosing that regime an advantage?
Many of us avoid America and go elsewhere to avoid unwanted and unnecessary inspection of our social media, will choose a restaurant which doesn't strip search before letting us in.
What happens when too many rules are removed ? Was this not one of the causes of the 2008 crash ?
So are we supposed to ignore history to make a fast buck and just hope that nothing goes wrong ?
Those who lost out after the 2008 meltdown were not the same as those who profited from lax rules beforehand.
The trouble with international competition is that a country's regulators will be under pressure to water down rules, or look the other way, while hoping that other all country's regulators do a good job.
Brexit wasn't supposed to happen. We were supposed to vote remain, so our government could continue implementing pointless, complicated regulations while blaming it all on the EU. Leaving scuppered them, because now they have no excuse and have to actually justify all their regulatory bullshit rather than passing the blame. That is the Brexit dividend: The real source of our problems has stepped squarely under the lamppost and revealed itself, meaning we can start applying practical solutions, rather than flailing at shadows. A bright light is the cure of many things.
While I am sure they are not perfect, the rules are there to protect investors. That is your and my pensions mainly.
Even institutional investors need the protection of the rules. In particular, transparency of transactions which could be manipulating reporting, or moving profits from one place to another within a group (countries, companies, etc) is critical. Either Softbank or ARM investors could end up badly hit if there is no visibility of financial shenanigans between the two or a lack of visibility on which parts of the group are having trouble.
1) That report is answering a different question. "Yours and my pensions", for most readers here, are highly invested in shares and corporate bonds (plus a fair bit in housing and government bonds).
2) For those people who's pension is mostly state-financed the problem is even worse: lax financial regulation and visibility allow companies to reduce their tax burden and increase the likelihood that illegal tax fraud could occur.
The leadership is all in the US now and so will much of the flagship development. Having worked there the US workers are absolutely gobsmacked how unproductive the Cambridge site was, so many meetings week in week out and so little getting done outside them. Principal engineers getting paid six figures just to bounce from meeting to meeting talking about processes, standards and committees.
I suppose when most of your revenue comes from royalties on long forgotten IP you can afford to do this, and just hike the price when the IPO is on the horizon.
There could never be a "silicon valley" in the UK. That's a fact.
Many (if not most) technology ventures fail, but US investors risk huge amount of money hoping that one such venture will take off to such a huge degree that they'll obtain a monopoly and the investors will end up making up for their losses.
Historically our competition watchdog has been reasonable effective at preventing the formation of monopolies, and i'm given to understand that historically, our finance sector has been far more risk adverse about losing large sums of money than the US has been.
Seems my experience has been different to yours, lots of 'can do it' on the US side and lots of other positive talk, then next meeting even more positive talk but in the end not much actually done.
I always found the concept of cheer leaders rather strange, on so many levels but it feels like that's the core of the American psyche, just keep cheering and talking things up hoping to shout down any opposition and then getting out before the proverbial hits the fan.
So this topic could be easily reframed that ARM just wants to avoid financial transparency and it actually has nothing to with Brexit.
It implies that remainers are grasping at straws or would love to have financial regulations dropped so that such companies would be welcomed here?
If you read TFA Brexit isn't mentioned once.
But as you wish to bring the topic up am I remembering incorrectly when we were told that Brexit would free us from red tape, we'd be rule makers, not takers, and consequently avoid this sort of thing?
You got your Brexit. ARM chose not to list here in spite of this new freedom.
Are you now trying to blame remainers for its failure?
"Are you now trying to blame remainers for its failure?"
It's all the fault of remainers, not only were they too thick too see the obvious advantages, even after the overwhelming vote that showed "what the people wanted® those intransigent remainers just point blank refused to come up with the required solutions and are still holding the whole country back ...
How is that possible ? When every single leaver absolutely knew what they were voting for and were completely united on everything .......
Despite their name I think its unfair on donkeys as even they will get you somewhere
While this article indeed does not mention it, it used to be a Brexit related topic:
Japan's Brexit warning casts shadow over Softbank ARM promises and ARM leaving is often attributed to this event by people who can't get over it.
we'd be rule makers, not takers, and consequently avoid this sort of thing?
Precisely, we have these financial regulations in place and if ARM doesn't like them, they should GTFO.
Are you now trying to blame remainers for its failure?
Rather wanted to point out that this is somewhat unrelated. That's it.
"You got your Brexit. ARM chose not to list here in spite of this new freedom."
The financial rules are likely a large part of the reason, but another biggy, as per the original article, is that the US NASDAQ also values companies higher than here and so is likely to also be a significant consideration. If you want to sell shares in your company, the best place to do it is the place that over values the stock price.
Related party transactions are generally used by multinationals to transfer profits from one country to another thus minimising tax. Arm has a significant UK presence and worldwide earnings so there is a fair chance it would be liable to a large chunk of UK corporation tax. Corporations typically mitigate this for example Thames water by moving profits offshore through transfer pricing mechanisms i.e. related party transactions many of which are created purely for the purpose of avoiding tax.
Given that Softbank needs the money they probably didn't want to pay the tax that would be associated with the UK listing because they would have to make transactions transparent.
At the end of the day it is the greedy UK government at fault for increasing corporation tax. As Milton Friedman said in reality only people can pay tax.
It's a good time for SoftBank to sell ARM.
RISC-V is slowly becoming a major competitor to ARM's instruction set monopoly. I expect that within 10 years, low end Chinese Android devices will mostly be using RISC-V to save a few cents. The high end phones will probably take longer, but a Google Pixel with RISC-V is possible within that timescale.
For low end microcontrollers, such as in a washing machine, the switch will happen much faster. The first products are already available.
It's early enough that the financial wizards will not see the threat, or will discount it as something ARM can compete with.
Everyone uses Arm cores due to the huge ecosystem of tools. And Arm is the monopoly owner of the instruction set. Companies cannot compete with Arm by selling a better Arm core design, because they would have to license the instruction set from Arm, and Arm could refuse or make it expensive.
With RISC-V, the ecosystem is now there. And there are multiple companies competing to offer the best cores. Arm could try to compete by using it's skills and experience to build great RISC-V cores, but ultimately they will be a commodity.
Indeed, but Softbank had better hurry up.
The original ARM shareholders - including founders - cashed out in 2016, 2 years after RISC-V was publicised. I'm sure they couldn't believe their luck that it took decades for a decent open and royalty-free ISA to appear. That was a good call.
Softbank didn't see RV coming in 2016 and I'm sure that pre-takeover ARM didn't make a point of worrying Mr Son about a few hippies in Berkeley. Now the only way for Softbank to cash out is selling EITHER to a) someone (e.g. NVIDIA) who knows all about RV and wants decent core designs and designers OR b) who will be so dim as to not realise that RV threatens ARM's business model, i.e. "licensing the ISA", not "designing decent cores" (or may be quite savvy, but confident of finding a greater fool to take it off their hands).
Tried a), that failed. Looks like b). Best of luck, there.
If ARM can keep designing decent cores, regardless of ISA, then it has a future and I'm sure the Cambridge developers know that. But, if the accountants and lawyers are in command, they'll continue the current business model, the only one they understand. Apple are perfectly capable of changing ISA again with almost no notice (they're very good at it); they've paid for the expensive whole chip design and I'm sure they're learning how the decent cores work and will dispense with ARM's ISA as soon as they find it convenient. I'd suggest that the high-end phones will be RV well within 10 years; so will the cheap ones. Don't be surprised if Apple start licensing decent core designs to everyone else.
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