A London chip designer billed as an “Arm wannabe” has received a takeover approach from a larger American rival, inflicting pain on the short-sellers that have targeted the stock since it was listed as one of the UK’s “class of 2021”.
San Diego-based Qualcomm said it was considering making a bid for Alphawave, sending shares in the UK-listed company up nearly 47 per cent, to propel its market valuation above £1 billion.
“There can be no certainty that any firm offer will be made, nor as to the terms on which any firm offer might be made,” Qualcomm said.
It has until April 29 to either make a formal offer or walk away. Alphawave declined to comment on the potential bid.
Qualcomm provides intellectual property for semiconductors, deriving most of its revenue from its equipment and services business.
The approach emerged just hours after reports that Arm Holdings, the Cambridge-based chip designer, has weighed an offer for Alphawave, raising the prospect of a bidding war for the embattled semiconductor specialist. Arm declined to comment.
Alphawave has been working with its investment bankers to explore a sale after receiving acquisition interest from Arm and other potential acquirers, according to reports from Reuters.
Like Arm, Alphawave designs chips that are embedded in semiconductors manufactured by partners such as the Taiwan Semiconductor Manufacturing Company and Samsung.
It has since expanded into designing custom chips and is now shifting again into selling its own complete chip designs directly to the American technology giants for use in their vast data centres. Its technology enables data to travel more quickly and reliably using lower power.
Arm, which is backed by SoftBank, the Japanese investment giant, was reportedly interested in Alphawave’s chip communication technology, which has become more sought-after since artificial intelligence systems require thousands of chips to be strung together to work effectively.
Tony Pialis, the company’s chief executive and co-founder, told The Times last month that his ambition was “to build the next great semiconductor company of the industry. Same as Rene [Haas] at Arm”.
Alphawave became the most heavily bet-against company in London last month after investors, including JP Morgan Asset Management, whose investment banking arm helped bring the company to market, raised their short positions in the company to an aggregate of 7 per cent of outstanding share capital. Short-sellers are traders that make money when the share price falls.
The Canadian company, the largest North American company ever to list in London, has shed more than two-thirds of its value since it joined London’s main market, even after the interest from Qualcomm and Arm emerged.
It was one of the “class of 2021” that launched alongside other auspiciously valued companies including Deliveroo, the food delivery app, and Moonpig, the online greetings card specialist, which have also sustained heavy falls in their valuations.
Confidence in Alphawave was knocked just months after it joined the public market by reports from the Financial Times that raised questions over whether it had properly disclosed related-party transactions. The company has said none of its customers is a related party.
The loss-making chip company has also issued a series of warnings over its performance, the latest of which came in January, when it said that revenue last year would be at the lower-end of its $310 million to $330 million guidance range.
The company reported a pre-tax loss of $49.9 million over the first six months of last year, up from $6.6 million a year earlier, alongside revenue of $91 million, down from $187 million, respectively.
Shares in Alphawave closed 43½p, or 46.5 per cent higher, at 137p.
