What's up guys and welcome back to wall street millennial on this channel, we cover everything related to socks and investing. This video was brought to you by omaze, where you can donate 10 to support a good cause and also get a chance to win a tesla model x, but more on that later. Let's imagine you're low on money and need a way to get some fast. If you don't have any legal or ethical restriction, the most efficient way to do this is to steal it from somebody else.

You could break into a car or rob your local liquor store, but this will only get you a few thousand dollars at most. If you want to make real money you're going to have to think even bigger, you could become a pirate and steal a boat which is still done today around somalia, but this will only get you a few million dollars. Let's say you want hundreds of millions or even billions of dollars. Is it even possible it's very much possible, but you're going to have to think even bigger.

You can't just steal an individual asset. You need to hijack an entire company. Specifically, you should target a large and growing technology company, as these are the most valuable. You might think that this is an absurd fantasy.

How can you just walk into the headquarters of a multi-billion dollar corporation and just declare that it's yours, but it's not a fantasy and it's happening today? Alan wu is currently the ceo of a semiconductor company called arm china arm. China is a subsidiary of the semiconductor giant arm holdings, which has an estimated valuation of 60 billion dollars all the way back. In 2018, the armed parent company tried to fire allen as they claimed that he was corrupt and abused his position to enrich himself, but alan. Just refused to leave, he remained ceo to this day and in fact, declared arm.

China will be an independent company controlled by him. It's hard to overstate how big of a deal this is arm. China has 700 million dollars in annual revenue and based on some reasonable assumptions. It's probably worth more than 15 billion dollars and one guy basically hijacked it and declared himself as supreme leader in this video.

We'll look at what arm. China is why they can't fire alan wu and what he plans to do with the company going forward. Quick pause from omaze, who is a sponsor of this video omaze, gives away one-of-a-kind prizes and experiences while donating money to chosen charities all across the world. Their sustainable approach to fundraising means that non-profits can spend less time and money raising funds and instead focus on serving the needs of their communities.

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The second is a charity called 501c3, which focuses on galvanizing the younger generations to build innovative solutions in the areas of energy, food, water and shelter. For your chance to win a tesla model x and support these two great charities go to omaze.com, wsm and now back to the video. If you own a mobile phone, either iphone or android, there's a pretty good chance that the chip within it was built on the arm. Architecture arm doesn't manufacture the chips they just designed them, but their proprietary architecture is considered to be leading edge.

For example, apple's recently developed m1 proprietary chip is built off of it. Whenever a company uses armed architecture, they have to pay royalties. In 2016, the japanese technology conglomerate softbank acquired arm for about 30 billion dollars. At the time, the biggest growth area for the company was china, with 1.4 billion people in a rapidly expanding technology sector, the country promised to become one of their biggest, if not their single biggest regional market.

They created a subsidiary called arm china, which was focused on designing chips for local chinese customers. The unit was very successful and they landed high-profile customers, including china's smartphone giant huawei. In 2018, they sold a 51 stake in the subsidiary to a consortium of investors led by hopeo investments, which is one of the largest private equity funds in china. While arm technically no longer held majority control, they were still the single largest shareholder, but around that time is when the problem started happening.

Alan wu was a longtime executive at arm working in the greater china region when they first established the armed china subsidiary. He was the natural choice to take over as ceo around the same time that allen took over as armed china, ceo. He also started his own private company called alpha texture venture fund, which invests in early stage chinese technology companies almost immediately alpha. Textures activities started raising red flags.

In 2019, his fund invested about 20 million dollars in a company called best technic, which is a major customer of arm. Just two years later, it increased tenfold backing woo and his associates. A 179 million dollar gain. Interestingly, just a few weeks after he made the investment arms accelerator program also invested in best technique, which gave them a huge boost, but even before that there were problems, allen reportedly offered discounts to arm customers.

If they invested in alpha texture. He even got a couple members of armed china's board of directors to invest as ceo of the company and owner of alphatecture. His role became blurred. Alpha texture focuses very heavily on investing in companies which arm has business relationships with alan claims that this is actually a good thing.

Through his venture capital investments, he can build better relationships which will benefit arm in the long run, but softbank and hopu weren't buying his explanation. At all. It looked a lot more like wu was trying to abuse his power to enrich himself. For example, it's possible that alan agreed to give best technic discounts if they let alpha texture, invest in them at an artificially low valuation.

This type of situation, where you have the right hand, giving to the left hand, is exactly what you should be suspicious of in 2018, the ceos of popular investments and softbank, who, together own a majority, stake in arm china, decided that enough was enough and alan wu Had to go in fact, the entire board of directors, with the exception of allen himself, voted in favor of firing him in a normal company. This is simple: if the majority of shareholders want, you gone, there's no way to fight against it. You just have to pack up your bags and go home, but alan wu wasn't about to go down so easily. In many asian countries, including china, every company is given an official company seal called a chop.

These official seals have been used for thousands of years and are still recognized in courts. Today the chop is required to approve official documents and make large strategic changes at the company, including firing the ceo, somehow allen managed to get the seal within his possession. So the only person who can fire him is himself after he refused to leave softbank hopu investments and all the other investors have been going to court to try to remove the seal from him. There's not really any disagreement.

Pretty much. Everybody wants him gone at. First, people thought it was no big deal feng fung lei, who is ceo of hope. Investments has been a member of china's financial elite for decades.

In the past he has advised the government on many high-profile transactions involving the country's massive state-owned enterprises, including china, mobile and sinopec. Most observers assumed that he could pull some strings and expedite the court proceedings, but now, four years later, allen is still ceo and still has access to armed china's bank accounts and full control over its operations. To add insult to injury, he is using armed china's money to pay for his own legal fees and court battles against the parent company. He fired anyone who was against them taking over the company and employed private security services to keep them out, while arm technically still owns arm china.

The subsidiary is for all practical purposes, operating as an independent entity after the split arms stopped, providing them with their latest chip designs so arm. China started developing its own new chips. In parallel, they recently developed a new chip called the xpu which they claim is currently being used by almost 100 customers within china. According to allen arm, china is doing well.

They've met all their revenue targets, with 700 million dollars worth of sales in 2021.. He even says that the company could pursue its own independent ipo by 2025., so why has it been so difficult for arm to take back control from allen? This is speculation, but it could be the case that the chinese government prefers armed china to be independent. Semiconductor design and manufacturing has become a strategic priority for countries around the world, with governments doling out tens of billions of dollars to support the industry within their borders. It's possible that china, once armed china to become a domestic chip, design champion independent of foreign influence.

But this is all speculation. It's also possible that it just has to do with the arcane structure of chinese law regarding the official company seal. But, regardless of why the court process is taking so long, the result is disastrous for the armed parent company, when softbank acquired the company in 2016, china made up 20 of its sales and was growing rapidly. The chinese market has now been taken over by arm china.

So this business is basically just gone. It appears that softbank is tired of dealing with this headache and wants to divest the company. Last year they tried to sell arm to rival jipmaker nvidia for 40 billion dollars after a year-long review. This deal was blocked by us and european regulators for anti-monopoly grounds with the merger.

Scrapped softbank is planning to do an ipo for arm at a 60 billion valuation, but they knew that before the ipo begins they had to resolve the china issue to resolve it arm. Will transfer ownership of arm china to a special purpose entity owned by softbank with this transfer? Softbank will be responsible for dealing with the situation if we apply the same revenue multiple as the rm parent company's planned. Ipo armed china is worth around 16 billion, but until alan wu can be forced out, softbank's stake in the company might not be worth anything at all. Alright guys that wraps it up for this video.

What do you think about the arm? China situation? Let us know in the comments section below also don't forget, to go to omaze.com wsm for your chance to win a tesla model x, plaid and support a great cause, as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.