The British microchip company Arm faces having to pay hundreds of millions of dollars to the head of its troublesome Chinese joint venture as it tries to get its accounts in shape for a blockbuster flotation.
Arm’s chief financial officer Inder Singh said the company would have to resolve a dispute that has left the Cambridge-based company without access to Arm China’s accounts before its owner SoftBank can float the company.
Allen Wu, the chief executive of the joint venture, has reportedly demanded hundreds of millions of dollars to give up control.
The situation became more urgent this week when SoftBank called off a deal to sell Arm to the US giant Nvidia and float the company.
Mr Wu was contacted for comment.
“The joint venture has obviously had some management turmoil in it that still needs to be resolved,” Mr Singh said. “If we are preparing for an IPO in this fiscal year… then it’ll be important for us to make sure that we have certain rights that will be important for our financials.
“One of those will be the continuing right to audit revenues. That’s something that we’re working hard to make sure that we will have in readiness for an IPO.
“I’m hopeful we are possibly on a path that might be able to resolve some things, but we’ve been on these types of things in the past.”
Arm said recently that it had been blocked from auditing the accounts of Arm China, in which it has a 47pc stake, and that it was also investigating suspicious payments made to senior executives at the business.
While the situation could have dragged on if Nvidia had bought Arm, selling to public investors is likely to carry a degree of financial disclosure that will require Arm to fully audit its Chinese accounts.
The company is likely to float in the US, where regulators have increased scrutiny of Chinese businesses in recent months. Arm has put the value of its stake in the joint venture at $827m.
Arm China’s board attempted to fire Mr Wu in 2020 but he has refused to stand down and retains control due to legal rights. He has appeared to distance the company from Arm in recent months.
Jay Goldberg, an analyst who follows China’s chip industry, said: “He can effectively scuttle the IPO until it’s resolved, he has a lot of leverage.”
A spokesman for Arm China said the company had not been withholding information.
“Anmou Technology (Arm China) has been duly providing information, including financial information, to Arm, and assuring its audit rights as the JV’s shareholder,” the spokesman said.
“Arm China is the key growth contributor to Arm’s business and we share a mutual goal of making more successes in China with all stakeholders and customers.”
Nvidia called off the $40bn takeover of Arm this week under mounting pressure from competition authorities in the US, UK and rest of Europe. SoftBank chief Masayoshi Son said New York’s Nasdaq exchange was the most likely venue for a flotation, despite Arm having been listed in London before its £24bn sale in 2016.
