Allen Wu, chief executive and chairman of Arm China, asserts that the company he heads may go public in either Shanghai or Hong Kong sometime in 2026 or later. He expects Arm Ltd., which is set to list at New York Stock Exchange early next year, to support Arm China's IPO.
"We are supportive of [British parent] Arm's IPO," said Allen Wu in an interview with the South China Morning Post. "We hope that Arm would also support ours."
Keeping in mind that Arm Ltd. cannot make its initial public offering (IPO) without properly disclosing its financial results and sources of revenue to regulators (which includes money it gets from Arm China, which refuses to open its books), the comment made by Wu endangers Arm Ltd.'s IPO as Arm China seeks independence from its parent.
Arm China is a joint venture between Arm Ltd. (currently owned by Softbank) and a consortium of China-based investment funds, including China Investment Corp. Hopu Investment and the Silk Road Fund. The Cambridge, UK-based Arm controls a 47% stake in Arm China, whereas Chinese entities hold a 51% stake and can decide the company's future. Because Wu possesses the corporate seals, he cannot be fired by Arm Ltd, which is why he is known as a rogue CEO.
Arm China says that the intellectual property licensing and royalty fees it generates account for about 25% of Arm Ltd.'s revenue. Meanwhile, it also asserts that it had developed a portfolio of technologies that allow it to continue operations without its parent company.
"Arm has written to Chinese authorities that Arm China won't survive without [the British firm's] support," Wu told SCMP. "But Arm China has already developed the capability to continue its operations separately from Arm in the UK."
While listing shares of Arm China in Hong Kong or Shanghai when shares of Arm Ltd. (which still possesses a 47% stake in Arm China) will be traded at NYSE may sound odd, it is not too uncommon in China. For example, Semiconductor Manufacturing International Corp. (SMIC), China's largest contract chipmaker, is a publicly-traded company with multiple fab joint ventures with local authorities and Chinese investment funds that sometimes have a controlling stake in those ventures.
