As it seeks to pull off what could the largest initial public offering of the year, Arm Holdings Ltd. spent more than 3,500 words explaining the risks it faces in China, a critical market that accounts for about a quarter of its revenue.
In a chunky section of the IPO filing’s 330-page prospectus, the British designer of chips detailed a litany of challenges in the country: a concentration of business in the People’s Republic of China that “makes us particularly susceptible to economic and political risks affecting the PRC”; a downward spiral in Asia’s biggest economy; rising political tensions with the US and the United Kingdom; and the potential complete loss of control over its pivotal Chinese subsidiary.
“We depend on our commercial relationship with Arm China to access the PRC market,” the filing said. “If that commercial relationship no longer existed or deteriorates, our ability to compete in the PRC market could be materially and adversely affected.” Those “shaky ties” with Arm China present a risk to profit in the future, according to Bloomberg Intelligence analysts Marvin Lo and Chris Muckensturm.
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