This article is originally referred from iForex Blog.
Is the $32 Billion Purchase a Big Mistake?
The Japanese SoftBank Group Corp. announced yesterday that it will purchase the British ARM Holdings for the whopping sum of $32 billion – a record deal for SoftBank. Now, it seems, investors are a bit skeptic: Softbank shares are currently down by over 10%[i].
What does this deal means for SoftBank – and why is the company willing to pay such a high price? ARM is a leading player in the mobile industry, and it’s not just about technology – it’s also about revenues. ARM receives royalties every time companies such as Samsung or Apple use its designs, which they do very often, as ARM’s designs are viewed as both proficient and power-saving.
This particular acquisition is unusual for SoftBank. Historically the company purchased large stakes in much smaller companies, or ones that have a substantial growth potential.
So – why are investors worried? The deal means that SoftBank will need to increase its already huge debt load. Are they right to be concerned or will ARM’s potential prove worthwhile? At iFOREX you have the opportunity to invest in the price of SoftBank shares and can always choose to wither short or long your position.
Original Source: iForex Blog