Today, Nvidia (NASDAQ:NVDA) and Softbank Group Corp announced it is abandoning their previously announced deal whereby NVIDIA would acquire Arm Limited from SBG.
Both companies decided to terminate the deal due to "significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties," SoftBank said in a statement.
Instead, Arm will now start preparations for a public offering within the fiscal year ending March 31, 2023. SBG believes Arm's technology and intellectual property will continue to be the epicenter of artificial intelligence development and mobile computing.
The deal, which faced several regulatory hurdles, was sued in late 2020 by the U.S. Federal Trade Commission. The Fed argued that competition in developing markets for chips in self-driving cars, and a new category of networking chips, could be hurt if Nvidia continued with the purchase.
Based in Cambridge, England, Arm is one of the world's most valuable behind-the-scenes semiconductor businesses.
The company licenses its technology and architecture to customers such as Qualcomm Inc (NASDAQ: QCOM), Apple (NASDAQ:AAPL), and Samsung Electronics (OTC:SSNLF), though Nvidia and Arm pledged that it wouldn't change had the deal gone through.
NOW WHAT
The collapse of the deal marks a significant setback to the Japanese conglomerate's efforts to generate funds at a time when valuations across its portfolio are under pressure, leading analysts to question the prospects of its IPO move.
Given Softbank's track record with many portfolio companies trading below their listing price, Jefferies analyst Atul Goyal recently wrote in a note stating, "We are worried that a persistent overhang of SBG stake reduction will keep the stock from appreciating."
SoftBank and Nvidia declined to comment. Arm did not immediately respond to a request from Reuters for comment either.
SBG's shares slid roughly 2% this year, following a 33% drop in 2021, its worst performance since 2006.
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