Boris Johnson has joined a final push to convince chip designer Arm to list in London, as UK government officials grow concerned over the lasting damage if Britain’s best-known tech company chooses New York for its initial public offering.
Ministers and executives from the London Stock Exchange have launched a charm offensive to persuade Arm’s Japanese owner SoftBank to rethink their strong preference for listing in New York, the default destination for the world’s biggest tech groups.
However, even as the UK’s efforts intensify, there is recognition that the chances of wresting the IPO away from New York are slim. SoftBank chief executive Masayoshi Son in February described New York’s Nasdaq exchange as “the most suitable” as it is “at the centre of global high-tech”.
The stakes are high for the government not just because Arm, founded and headquartered in the UK, was previously listed in London before SoftBank acquired it for £24.6bn in 2016. There are also rising fears that a Wall Street listing would deal a blow to efforts to foster a tech sector in the UK, according to people familiar with the lobbying effort.
“There is an enormous amount of effort being made,” said one of the people involved. “They don’t get any bigger than Arm and it would be a big hit to take if they left. It would be a very negative signal if they don’t choose to list here.”
As part of the last-ditch effort, Johnson has written to SoftBank executives, according to people familiar with the matter. The lobbying initiatives stretch across a number of government departments, including the Department for Digital, Culture, Media & Sport (DCMS), Treasury, business department as well as Downing Street.
Digital minister Chris Philp and Gerry Grimstone, the former Barclays chair who now heads the UK’s office for investment, are leading the lobbying efforts.
Philp and Grimstone are expected to meet SoftBank executives again in the coming weeks, according to two people familiar with the plans, alongside executives from the LSE. “There is a political impetus to win Arm for London,” said one person familiar with the planned meetings. “The government is trying to foster tech subsectors — Arm is in a very relevant sector and is also politically sensitive.”
The government of Theresa May waved through the takeover of Arm in 2016 after SoftBank pledged to keep jobs in Britain, despite concerns that the UK was losing one of its most valuable corporate crown jewels.
SoftBank is returning Arm to the public markets after a planned $66bn sale to California-based Nvidia collapsed earlier this year after competition regulators intervened.
Two people familiar with SoftBank’s thinking said there was very little possibility of changing plans and listing in London, adding that being in New York makes more sense as it is where a larger number of retail investors are based.
Unlike in 2017, when London controversially offered to overhaul listing rules to woo Saudi Aramco, regulatory officials say there are no easy changes that could entice Arm. In the event the group did list in London, it would be fast-tracked into the premium segment of the FTSE 100, where it would become the largest tech business.
It is a point that those involved in the lobbying effort make, with one saying that “in London it would be No 1. In the US, there would be many bigger tech companies.” They also added that as an established company, rather than a lossmaking tech start-up, UK investors would hand Arm a healthy valuation.
Those involved in lobbying efforts are also examining whether to bring together UK asset managers to help make the case. Many London fund manager were investors in Arm when it was listed in the UK.
People involved have made clear that they are fighting for the primary listing of Arm, rather than a secondary listing of shares, which would exclude Arm from the flagship FTSE 100 index. “The big difference is being in the FTSE. Companies such as Verizon and Worldpay had ADRs [shares tied to a secondary listing] in London but it’s not the same.”
A government spokesperson declined to comment on individual cases, but said: “We want to make the UK the most attractive place for innovative businesses to grow and raise capital.” SoftBank, Arm and the LSE declined to comment.
Additional reporting by James Fontanella-Khan and Anna Gross