Nvidia's failed attempt at buying out UK-based chip designer Arm was big news in the tech world this week. Japanese conglomerate SoftBank quickly announced it would go the IPO route for Arm after international regulators burned the record-setting, $66 billion Nvidia acquisition. However, ghosts from Arm's rogue China unit may prevent even the IPO from coming to fruition. Allen Wu, the head of the company's Arm-China joint venture, has launched a third legal case against the company with the aim of getting himself officially reappointed to the Arm China board.
Arm has been entrenched in a legal battle with its China division since 2020 when the company attempted to fire then (and still current) leader of the joint venture Allen Wu via a 7-1 vote enacted by Arm China's board. Seemingly under the cover of China's legislation, Allen Wu has managed to remain in control of the rogue unit whose activities have already come under investigation regarding suspicious payments to its senior executives. The executive has also kept the company seal, which is required under Chinese law to authorize official documents. Of course, Arm isn't happy with the state of affairs - and we'd imagine SoftBank isn't either, as regulators surely won't turn a blind eye to the Arm China-shaped black hole in the company's financials.
"Even if we weren't doing an IPO that would still be something we would be focused on," said Inder Singh, Arm's chief financial officer. "I am hopeful that we are possibly on a path that might be able to resolve some things," he continued.
It's estimated that roughly 20% of the company's finances can't be audited due to that unit's opaqueness - which went to the point of hiring a security detail with the sole mission of preventing access from Arm executives to China's branch. This was implemented alongside an email filtering system to block any incoming communications from Arm's headquarters.
For its part, Arm recently covered the state of affairs in its financial report, where it clarified that the still unsolved situation prevented the company from accessing Arm China's accounts for a financial audit. As a result, Arm isn't even aware how much its initial 49% stake in the venture (an estimated $827 million value at the latest update available to the UK company) is worth today. Interestingly, reported revenue from Arm China dropped from $483.5 million in 2019 to $407 million in the following financial year.
Despite those events and Arm's comments on the matter, an Arm China spokesperson (speaking on behalf of Allen Wu) said the company continues to provide financial information to Arm and that it is a "key contributor to the growth of Arm's business." The spokesperson then added that Arm China was "(...) fully supportive of Arm's IPO plan as its long-term China partner and value contributor," - but declined to comment on ongoing legal matters. So perhaps those emails too got caught up in Arm China's filtering systems.
