Today, Nvidia (NASDAQ:NVDA) and Softbank Group Corp announced it is abandoning their previously announced deal whereby NVIDIA would acquire Arm Limited from SBG.

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Both companies decided to terminate the deal due to "significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties," SoftBank said in a statement.  

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Instead, Arm will now start preparations for a public offering within the fiscal year ending March 31, 2023. SBG believes Arm's technology and intellectual property will continue to be the epicenter of artificial intelligence development and mobile computing.

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The deal, which faced several regulatory hurdles, was sued in late 2020 by the U.S. Federal Trade Commission. The Fed argued that competition in developing markets for chips in self-driving cars, and a new category of networking chips, could be hurt if Nvidia continued with the purchase.

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Based in Cambridge, England, Arm is one of the world's most valuable behind-the-scenes semiconductor businesses.

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The company licenses its technology and architecture to customers such as Qualcomm Inc (NASDAQ: QCOM), Apple (NASDAQ:AAPL), and Samsung Electronics (OTC:SSNLF), though Nvidia and Arm pledged that it wouldn't change had the deal gone through.

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NOW WHAT

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The collapse of the deal marks a significant setback to the Japanese conglomerate's efforts to generate funds at a time when valuations across its portfolio are under pressure, leading analysts to question the prospects of its IPO move.  

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Given Softbank's track record with many portfolio companies trading below their listing price, Jefferies analyst Atul Goyal recently wrote in a note stating, "We are worried that a persistent overhang of SBG stake reduction will keep the stock from appreciating."

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SoftBank and Nvidia declined to comment. Arm did not immediately respond to a request from Reuters for comment either.

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SBG's shares slid roughly 2% this year, following a 33% drop in 2021, its worst performance since 2006.

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