Not the first time, SoftBank is having a terrible, terrible, not a good, very bad week. Indeed, even though the Japanese group is known for its extremes – whether it is bold bets, Internal quarrel, bitterness Business relationships, or its ability to repeatedly bounce back Off the brink – some new developments may prove particularly difficult, if not impossible, to overcome.
The worst of these, seemingly, is the lawsuit filed yesterday by the Federal Trade Commission to block chipmaker Nvidia’s acquisition of Arm, the British company that licenses the chip technology, out of concern that the deal could cost Nvidia. Computing will give a lot of control over technology.
“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets,” said Holly Vedova, director of the agency’s Competition Bureau, said in a related statement, “This proposed deal would distort Arm’s incentives in the chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals.”
Problem for SoftBank? A bad deal could mean billions of dollars for the organization, which acquired the now 21-year-old Arm in July 2016 in a cash-and-stock deal worth $40 billion before selling it to Nvidia for $32 billion. It’s worse than it sounds. Nvidia’s share price is rising so rapidly that, as Bloomberg noted earlier today, that $40 billion deal has since ballooned. $74 billion deal,
It may not be an outright disaster for SoftBank. The deal is expected to receive regulatory scrutiny by the time it was announced, so SoftBank may have looked into this potential in advance. Nvidia also says it will fight the FTC lawsuit (though that seems unlikely to win against the agency). In addition, everything chip-related is in great demand at the moment.
Still, it’s not clear what the Arm would be worth to another buyer. Meanwhile, if SoftBank decides to take the organization public instead, it could be close to half what Nvidia paid for, Bloomberg estimates, based on an average market-capitalization-to-sales ratio of 9.9 times. Member of the Philadelphia Stock Exchange. The semiconductor index is currently enjoying. (We have previously contacted SoftBank and are yet to receive a response to our press request.)
Meanwhile, SoftBank is also at risk of losing a key lieutenant over compensation. according to a New York Times story In what was published earlier this afternoon – at a time that is perhaps not coincidental – Marcelo Clare, who is SoftBank’s chief operating officer and widely considered the right-hand man of SoftBank founder and CEO Masayoshi Son, had a long-standing relationship with The fight is locked in. company on their compensation
In fact, according to four people who spoke with the Times, he’s apparently ready to leave SoftBank if it doesn’t get what he wants, which amounts to $2 billion in compensation over the next several years. SoftBank is apparently thinking about tens of millions of dollars at most instead.
This would be a huge loss for SoftBank. Claire wears several hats for the company. For example, he was the interim CEO of WeWork after the ouster of Adam Newman, and helped recruit the current CEO, Sandeep Mathrani. Claire’s also tops two other organization charts: its diversity-focused SoftBank Opportunity Fund and its SoftBank Latin America fund vehicle, which accounts for most of the firm’s outsized stakes these days. (We spoke with Claire about SoftBank’s aggressive LatAm strategy at Disrupt in September; see below.)
Certainly, Claire would also be one of the highest profile in a very long string of departures from the firm. Earlier this month, Bloomberg noted that SoftBank’s “eccentric” approach to compensation — it pays far less than similar-sized rivals — helped accelerate the resignations of seven managing partners since March last year. Ltd., along with its sole senior managing partner Deep Nishar, announced last week that it was joining General Catalyst as a managing director.
SoftBank has recovered from the bad situation, but it seems particularly vulnerable at the moment. Just last week, Son revealed that SoftBank Group has lost more than $50 billion due to Beijing’s technical action and its shares fell sharply. With these two new and very public developments, it’s going to be so hard to boost investor confidence in the company.