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Shares of Nvidia Corp. were declining in Tuesday trading after a report indicated that the company is preparing to give up on its planned purchase of Arm Ltd. from SoftBank Group Corp.
The semiconductor company has faced regulatory opposition to the $40 billion combination and has told partners that it doesn’t expect that the deal will close, according to Bloomberg, which cites an unnamed source.
Additionally, SoftBank
SFTBY
JP:9984
is considering turning Arm public through an initial public offering assuming that the deal doesn’t occur, per the Bloomberg report.
Shares of Nvidia
NVDA
were down nearly 5% in Tuesday morning trading.
“We continue to hold the views expressed in detail in our latest regulatory filings—that this transaction provides an opportunity to accelerate Arm and boost competition and innovation,” an Nvidia spokesperson said.
The Federal Trade Commission sued in December to block Nvidia’s proposed Arm takeover and the U.K. opened an investigation into the national-security impacts of the deal earlier in 2021.
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Bernstein analyst Stacy Rasgon wrote following the Bloomberg report that he doubted investors would be surprised if the deal fell through given heavy pushback from regulators and customers.
“It feels safe to say that virtually no one in the investment community has expected it to close anyway,” he said in a note to clients.
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Rasgon added that while he thought Arm could have been a “wonderful” asset for Nvidia, he doesn’t think that the company needs Arm for success.
“In our opinion, the impetus for the deal was to help create and drive a broader ecosystem for Arm particularly in the datacenter; NVDA presumably can and will continue standalone their efforts here though it is possible such efforts could have been accelerated through owning the asset,” he wrote.
Shares of Nvidia are off 3.7% on a three-month basis but up 63.3% on a 12-month basis. The S&P 500
SPX
has slipped 5.7% over the past three months but risen 11.7% on a 12-month basis.
