the times | Tuesday September 15 2020 2GM 35
Business
Nikola has admitted to filming one of
its lorries rolling downhill in a market-
ing video.
Hindenburg Research, an American
short-seller, claimed last week that the
electric lorry maker had faked a
promotional video in 2018 by rolling its
Nikola One truck “down a big hill” to
disguise the fact that the vehicle had no
working engine.
However, Nikola insisted it had only
ever described the lorry as being “in
motion”, rather than being driven.
“Nikola described this third-party
video on the company’s social media as
‘in motion’. It was never described as
‘under its own propulsion’ or ‘power-
train driven’,” the company said in a
lengthy rebuttal yesterday.
The company was founded in 2014
and was listed on the Nasdaq stock
Nvidia’s position is
really not so bad
W
hat an outrage:
British tech star sold
to foreign bidder. To
judge by some of
the reaction,
anyone would think this is the first
time Arm has been acquired by an
overseas buyer.
Haven’t we been through this
already: four years ago, when the
City’s prize short-termists cashed in
their chips for £24 billion and flogged
the Cambridge-based outfit to
Japan’s Softbank? Is it really such a
big deal that Arm is now being sold
again, this time to America’s Nvidia
for $40 billion?
Well, Arm co-founder Hermann
Hauser thinks it’s a “disaster” for
Britain and that Boris should “block”
the sale. He predicts “large job
losses” in Cambridge, the switch of
the Arm HQ to Nvidia’s Silicon
Valley home and the end of the chip
designer’s business model: the
“neutral” one allowing anyone to
buy its kit, now powering 95 per cent
of all smartphones.
Mr Hauser also envisages political
fireworks, with American ownership
enabling US politicians to block
sales to overseas customers on
security grounds. Think China,
where Arm has a fifth of its sales. As
Mr Hauser puts it, the Nvidia deal is
“equivalent to letting Trump get his
hands on Trident”.
Really? That’s far too much
scaremongering for a relatively
’armless deal. Yes, Nvidia is a
different beast to Softbank. Valued at
$310 billion, it’s the world’s top
semiconductor group, having
leapfrogged Intel, and the whizziest
in artificial intelligence. It’s a
competitor to Arm customers. So, in
his quest to bring AI to “trillions of
computers”, its founder and boss
Jensen Huang will have to tread
carefully with the likes of Apple,
Broadcom and Qualcomm. But he’s
right that it’s not in his interests to
ruin a business built on “openness
and fairness” that he’s “paid
handsomely for” in cash and shares.
Even so, he needs to stop being so
vague. Pledges over UK jobs and
Arm’s Cambridge HQ, given by
Softbank, expire next September.
And while Mr Huang has eye-
catching plans for Britain, the
government must pin him down. He
says he’ll keep Arm’s UK base,
establish “a new global centre of
excellence in AI research” and spend
“millions and millions” on an “Arm-
powered” supercomputer: a “Hadron
Collider”, no less, for AI that’ll bring
more global talent to Cambridge.
But ask what hard commitments
he’s made in his early talks with UK
ministers and he says merely he’ll
come up with “whatever the UK
government needs”. Also, that
putting numbers on jobs is “not the
most constructive thing to do”. The
Prospect union is right that
ministers should “impose some
binding conditions”. Kraft/Cadbury
proved that.
Still, Mr Huang, who owns 3.5 per
cent of Nvidia, makes a fair point
when he says neither Arm nor the
company he built got where they are
“by not being trusted”. And Arm
may even benefit from some Silicon
Valley stardust. Remarkably, when
Softbank bought Arm, Nvidia was
valued at roughly the same as theUK company. Since then, its shares
have rocketed tenfold. Yes, the deal
brings regulatory, political and client
risks. But Nvidia may yet prove a
decent owner for Arm.En garde
O
n past form, a security guard’s
alsatian would have more
chance of buying G4S than
Gardaworld. Having pitched up in
April last year, the Canadian outfit
took the novel bid approach of doing
nothing. As G4S noted, during the
offer period “it received no proposals
from Gardaworld, nor any requests
for information or for an extension”
to the put-up-or-shut-up deadline.
That Gardaworld was already
5.5 times geared didn’t help, either.
So to see it rock up again with a
mooted £2.95 billion cash bid invites
scepticism. This time, though,
Gardaworld is a different animal.
Two months after it slunk away
from G4S, BC Partners took a 51 per
cent stake, valuing the business at
$4 billion. Gardaworld boss Stéphan
Crétier was left with 42 per cent and
senior managers the rest. And now it
has the ammo to go hostile: a buyout
firm’s equity cheque and debt from
Barclays, Bank of America and UBS.
It made its first tilt in June at 145p,
when G4S shares stood at 102p,
since when it’s raised to 153p and
now 190p. Forget the talk of an 86
per cent premium: G4S shares had
been poleaxed by a pandemic and
have since been lifted by July’s half-
year results. But the G4S board,
chaired by John Connolly, has little
excuse for sitting on the latest
putative offer since September 1,
forcing Gardaworld to go public. It’s
credible, as implied by the 25 per
cent jump in G4S shares to 182½p.
Yes, the board reckons it
“significantly undervalues” the
business and claims it’s only a 31 per
cent premium. But the seven-year
turnaround of boss Ashley Almanza
has still left the shares adrift of the
252p he inherited. And Mr Crétier
justifiably points out that, unlike the
board, the bidders have their own
money on the line. They may have
to spend more of it yet. But this time
G4S is in a proper dog fight.Bang out of order
H
ere’s a dynamite idea for Rio
Tinto — or Rio TNT, as it’s
now known. It’s from the
Canberra government, which is
insisting the miner’s next boss is
Australian. Apparently that’ll make
it less likely to blow up 46,000-year-
old sacred Aboriginal sites (report,
page 38). Where’s the proof of that?
Yes, ousted boss Jean-Sébastien
Jacques is French. But the plans
were originally approved by the
government of Western Australia,
which is vaguely Down Under. Chris
Salisbury, the iron ore chief who lost
his job, is Australian. Ditto most of
the employees who set the
explosives. Ditto non-exec Michael
L’Estrange, whose whitewash report
failed to save the boss. Rio should
ignore Canberra and pick the best
candidate.business commentary Alistair Osborne
Lorry maker admits downhill roll video
exchange in New York in June. It is
working to build lorries that are
powered by hydrogen fuel cells.
Hindenburg, which stands to profit
from any fall in Nikola’s share price,
published an explosive report last
Thursday in which it called Nikola “a
$20 billion cloud of smoke”. It claimed
that Nikola was “an intricate fraud built
on dozens of lies over the course of its
founder and executive chairman
Trevor Milton’s career”.
Alongside the video claims, the
activist hedge fund also alleged that
Nikola had used parts built by other
companies, despite claiming to have
designed all of its key technology
in-house.
The example given was an inverter,
an essential electrical component,
featured in marketing videos. Hinden-
burg said that it had been made by a
company called Cascadia and thatNikola had covered up the logo with
masking tape.
“At no time did Nikola state that the
inverter on the prototype truck shown
in the video was the company’s or would
be used in production,” Nikola res-
ponded. “The company does use third-
party parts in prototype vehicles, some
of which may be subsequently swapped
out for its own parts in production.”
It added that “these allegations by the
short-seller are false and misleading,
and designed to manipulate the market
to profit from a manufactured decline in
Nikola’s stock price”.
The response seemed to reassure its
investors. Shares in Nikola, which lost a
third of their value towards the end of
last week, rose 11.3 per cent to $35.79 in
New York yesterday. However, those
gains were erased in after-hours trad-
ing amid reports that the US regulator
was looking into Hindenburg’s claims.Tom Howard
supplier of the core technologies that
power data centres — an arena that is
growing rapidly as applications that
run on remote servers rather than
devices become more common. Nvidia
already has a strong foothold: it started
out as a specialised developer of chips
for high-end gaming systems, but has
adapted its technology for data-inten-
sive tasks such as running artificial
intelligence applications. Arm’s low-
power technology is already making
inroads into servers and data centres,
which consume vast amounts of
energy.
Nvidia recently passed Intel as the
Arm would preserve its independence
under Nvidia’s ownership.
At the time of the Softbank acquisi-
tion, Nvidia was worth roughly the
same as Arm, but their fortunes have
diverged. Under Softbank’s ownership,
Arm’s annual revenues have grown
from $1.2 billion to $1.9 billion and in-
vestment in future development has
wiped out profits. Over the same time-
frame, Nvidia’s revenues have trebled,
it is valued at $310 billion and its profits
are soaring. With the bell having rung
for the latest round of technology
industry consolidation, there is little
doubt which is the heavyweight now.world’s largest semiconductor com-
pany and the prospect of it extending its
empire has caused disquiet in the
industry. Many of Nvidia’s rivals are
customers of Arm; many will fear be-
coming reliant on technology owned
by a powerful competitor.
Hermann Hauser, 71, a venture capi-
talist who helped to found Arm, has
argued that it would be “very much in
Nvidia’s interests” to prevent competi-
tors from licensing future Arm tech-
nology. Simon Segars, Arm’s chief
executive, 52, countered: “I don’t expect
that to happen. That’s a paranoid way of
thinking about it.” Mr Huang said thatCompany boss
with real skin
in the game
Profile
M
ost chief executives
will crack open a bottle
of champagne when
their firm reaches a
landmark (Simon
Duke writes). Not Jensen Huang.
The founder of Nvidia had the
chipmaker’s logo tattooed on his
upper arm when its share price first
breached $100.
Mr Huang had plenty more to
celebrate yesterday when Nvidia
agreed the $40 billion takeover of
Arm Holdings, sending its share
price rocketing.
The 57-year-old was born in
Taiwan and grew up in Oregon after
his family emigrated to the Unitged
States. After studying electrical
engineering at university and
earning a master’s from Stanford, he
worked as a microchip designer in
Silicon Valley.
He founded Nvidia in 1993. the
company carved out a niche
developing semiconductors for
advanced gaming consoles and PCs.
This requires a chip to process large
quantities of data in real time.
Nvidia has been able to adapt its
technology for new, high-intensity
activities such as machine learning.
In the past, Mr Huang has used
his soaring share price to move into
new areas. Nvidia’s stock has
multiplied in value by 50 times over
the past decade and Mr Huang’s
reported 3.8 per cent holding is
worth $12 billion. In March, he told
investors that there would be no
more large acquisitions for a time
after he sealed the $7 billion
acquisition of Mellanox
Technologies, an Israeli rival. After
Softbank placed Arm on the block,
however, Mr Huang could not resist.ROBERT GALBRAITH/REUTERS; NVIDIA; ALAMYNvidia HQ
no jobs would be lost at Arm’s Cambridge base after buying it from Softbank
Arm HQ