Hard Knock Life

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What's going on?

Nvidia announced this week that its abandoning its acquisition of British chip designer ARM, and the chipmakers never looking back.

What does this mean?

Nvidia announced plans to buy ARM from Japanese conglomerate SoftBank back in September 2020, in hopes of expanding its reach across the entire semiconductorindustry. But that lofty goal was also why the $40 billion deal was arguably doomed from the start, with some of ARMs biggest customers including Microsoft and Qualcomm expressing worries that Nvidia would end up with too much control over chip designs. The US government seemed to agree, which might be why it moved to block the deal back in December.

So this week, Nvidia finally abandoned what wouldve been the biggest deal in the history of the chip industry. SoftBank, for its part, responded with plan B: its planning to list ARM on the stock market by March next year (tweet this).

Why should I care?

Zooming in: Thats got to hurt.
SoftBank will receive a breakup fee of up to $1.3 billion from the failed deal, but the company wouldve made a lot more had the deal gone through more even than the $40 billion initially proposed. See, Nvidia was planning to buy ARM partly using its own stock, which has more than doubled since the agreement was first struck. That means the deal wouldve actually been worth as much as $80 billion.

The bigger picture: SoftBanks bad year.
SoftBank couldve done with that cash: the company reported on Tuesday that its profit fell 97% last quarter versus the same time in 2020, after its investments in tech stocks plummeted amid looming interest rate hikes. This money, then, couldve helped it buy back some of its shares which have collapsed 45% in the last year and boost the value of those left over. Thats left SoftBank scrambling to raise cash some other way, which might be why its now reportedly thinking of selling some of its substantial holdings in Chinese giant Alibaba.

Originally posted as part of the Finimize daily email.

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