Digital Kingdom

On June 1, 2016, International Children’s Day, Digital Group acquired a 5% stake in ARM for US$1.1 billion. Zhao Ziming, then chairman of the Digital Group’s board of directors, publicly announced that it would acquire ARM.

As soon as the news came out, public opinion was in an uproar!

The European financial circle generally believes that his brain is absolutely flooded and broken.

The reason why everyone is not optimistic about the digital group's acquisition of ARM.

On the one hand, the size of ARM is huge, far exceeding Digital Group's valuation of 100 billion yuan during the mixed reform in February, not to mention that the general mergers and acquisitions require a premium of 50%, and the possibility of "Snake Tunxiang" acquisition is relatively small.

The most important thing is that the United Kingdom is a member of the "Wassenaar Agreement", China is an embargoed country, and the chip industry belongs to one of the nine categories in the list of "dual-use goods and technology control".

It can be said that this restriction directly crushes the possibility of Digital Group acquiring ARM.

Although the agreement stipulates that it is up to the governments of each country to decide whether to allow or refuse the transfer of a certain item, and to notify other member states of relevant information on a voluntary basis to coordinate and control export policies.

But the "Wassenaar Arrangement" (permanent establishment) itself was established under the control of the United States, and the status and influence of the boss within the organization can be imagined.

There should be an unfavorable premise. The US government has just rejected Tsinghua Unigroup’s acquisition of US chip giant Micron Technology Inc (Micron Technology Inc) on the grounds of security.

According to the "Wassenaar Agreement", notification of a country’s refusal to transfer an item does not mean that other member states have the obligation to reject similar transfers.However, if a member country has approved a transfer license and another member country has refused to approve a transfer that is "essentially the same as this project" in the past three years, the country is obligated to be within 60 days (preferably within 30 days) Inside) to notify other member states.

In this case, it is almost impossible for the digital group to acquire ARM.

Therefore, as soon as Zhao Ziming's public statement came out, the major European hedge funds instantly reveled and rushed to the British Stock Exchange and began to short the stock of ARM.

The reason why hedge funds choose to do this is because they firmly believe that Digital Group cannot complete the acquisition, because in principle, you cannot short a stock that is sure to rise.

To understand this matter, one must have a clear understanding of the logic of the entire event.

According to common sense, in order to acquire a company, the bid price is slightly higher than the current market price.

Because only then can someone be willing to sell it to you.

ARM’s current stock price is US$16, and the purchase price may cost US$20 or even US$25. The company’s current valuation is about US$25 billion, and the final acquisition may reach US$40 billion.

As soon as the acquisition news is released, the public stock price will soon rise to the acquisition price. This is a natural market reaction.

ARM's shares hit the daily limit in the afternoon, and then the stock price fell back. The current increase is 6.2%, nearly 1.5 billion U.S. dollars, which exceeds the value of Zhao Ziming's shares. This is only the power of the first day.

All hedge funds in Europe know the "Wassenaar Agreement", and everyone is very sure that the Digital Group will not be able to complete this acquisition.

Once the acquisition breaks down, the stock price of the acquired company will surely plummet, falling below its original price.

Therefore, these people have come to short ARM, hoping to make a fortune.

It can be said that this is the nature of capital.

In the same way, not only is the acquisition generally looked down upon internationally, even in China, the major media are also pessimistic.

Bad talks, critical analysis, and satirical remarks are endless.

We cannot blame everyone's lack of confidence, but the reality is more cruel.

Chips have always been the most painful "core disease" in China's integrated electronics industry. Because of technical reasons and obstruction by the United States, this weakness has continued to this day.

According to data, the domestic integrated circuit market in 2016 was close to 1.2 trillion yuan, while domestic industry sales are expected to be about 400 billion yuan, and the self-sufficiency rate is less than 40%.

Since last year, the import of integrated circuits has surpassed that of crude oil, and the import balance has exceeded 95 billion U.S. dollars. The gap this year will be further widened.

At the same time, the life of domestic chip companies is not easy.Affected by serious product homogeneity and lack of core technology, the domestic chip industry has always been in a low-profit and slow-developing situation, and even the strange phenomenon that the profit of selling coffee is 100 times higher than that of chips.

Not to mention the potential risks of long-term dependence on imports.

The continuous and high proportion of overseas chip imports means that my country's electronic product manufacturing industry is always under the control of foreign companies, and it is difficult to break the formed monopoly.

Moreover, once domestic industries use "foreign cores", they will form long-term dependence, and it will be difficult to surpass them in terms of computers, the Internet, and the Internet of Things.

In order to break this predicament, both the country and the enterprise have tried their best and tried their best, but the result has been repeated defeats and frequent failures.

Needless to say, the "Hanxin Incident" had an unprecedented impact!As a result, for a long time, the scientific research circle talked about the discoloration of the core, which seriously interfered with the normal development of the chip industry.

In the corporate world, Tsinghua Unigroup is the main force among them, and its bumpy road reflects the difficulty of the chip industry wanting to rise to a certain extent.

Since the US$23 billion acquisition offer of Micron Technology was denied, a series of failures followed.

In September of the same year, Tsinghua Unigroup planned to acquire a 15% stake in Western Digital, the world's second-largest hard drive manufacturer, but it ultimately failed to materialize.

This year, Taiwan’s three chip makers Licheng Technology, Nanmao Technology and Sipin Technology originally planned to sell a total of US$2.6 billion in shares to Tsinghua Unigroup. However, the plan is about to be shelved due to failure to obtain government approval.

According to rumors, Tsinghua Unisplendour also has mergers or acquisitions of South Korean Hynix and Taiwan’s TSMC, but none of them are successful.

It can be said that almost all failures have the shadow of the US government behind them.

Faced with this situation, it is no wonder everyone lacks confidence.

Because there are too many shocks, hope-disappointment-hope-disappointment...

For Chinese companies, acquiring ARM is almost an impossible task.

Not to mention the massive funds involved, how to successfully break the "Wassenaar Agreement" is the number one problem facing Zhao Ziming.

But what is strange is that the Digital Group still bought ARM stocks in the market, as if turning a blind eye to the "Wassenaar Agreement" and turning a deaf ear to the warning of the world boss.

As a result, this has attracted more hedge funds to participate in short-selling, and not only in Europe, but also in the United States, there are funds running to participate in the grand event.

Regardless of whether Zhao Ziming is crazy or arrogant, the investment of the Digital Group is always real money.

It is impossible for these vultures to make money without making money.

I was eating this bowl of rice, so whoever you Zhao Ziming is.

The appearance of the President of the United States could not stop everyone from earning money.

At this time, everyone felt that Zhao Ziming, who had done well before, was really dazzled by victory and made a big miss.

For danger, turn a blind eye, for criticism, desperate.

Its performance is completely unlike what a mature entrepreneur does.

The eyes are higher than the top and they will go their own way.

At this time, everyone suddenly thought that Zhao Ziming was less than 28 years old, at the age of arrogant and defiant people.

It's just his previous achievements that make people forget that he is just an ordinary person.

For Zhao Ziming, mistakes that adults will not make are the only way to go.

There is no genius in the world who is born to know.

Every successful person is struggling with countless pains. A young and famous person like Zhao Ziming who is so smooth and soaring has almost no good end.

Perhaps the ARM M&A battle was Waterloo in his life, a turning point in his prosperity and decline.

It can be said that in the eyes of ordinary people, this merger and acquisition war is just a financial news, and it is no different from previous company mergers and acquisitions.

However, in front of professionals, the ARM M&A war initiated by Zhao Ziming is a huge gamble.

Some people admire his courage to be a car with a manly arm, while others laugh at his overpowering arrogance.

Everyone knows that this move Zhao Ziming has suppressed all of his own honor, and if he fails, the consequences are unimaginable.

Chasing ups and downs is not only a common practice in the stock market, but also a commercial application.

Before this battle, Zhao Ziming walked all the way, smoothly, gradually stepping into the altar and becoming the idol of thousands of entrepreneurs.

Although there are occasional setbacks in the middle, they do not hinder the overall situation.

In the words of Liu Guochao, a well-known big V, civil rights fighter, and well-known public knowledge:

"Success has always been easier than Zhao Ziming."

How much praise I enjoy, I bear much criticism.

Not to mention that Zhao Ziming walked all the way, stepping on countless bones, countless competitors, even in the eyes of passers-by who have no strong relationships, many people are dissatisfied with him.

After all, jealousy is the seven natural sins of mankind, and deep down in everyone's heart, there is gloating.

There are so many people who are jealous of Zhao Ziming's success, there are so many who want to see him unlucky.

When Zhao Ziming was in full swing, all conspiracy and trickery disappeared without a trace, and all competitors were lurking minions.

However, once this acquisition war fails, long-standing problems may rush into.

Irony and ridicule are still common, and changes in people's hearts can even bring collapse.

Sometimes, ten successes cannot withstand one failure.

By then, will the digital group lose control?Will Brilliant and Golden Dragon have a chain reaction?

What people need is a wise entrepreneur who can lead the company to glory step by step, not a risky, impulsive, arrogant leader who will ruin the good situation.

Even if Zhao Ziming holds an absolute controlling stake in the company, in the face of silent pressure from the government, the implicit dissatisfaction of shareholders, and the doubts of his subordinates, will he make mistakes or even make more outrageous decisions?

Almost everyone can think of.

A leader who loses his heart, even if he holds more written shares, it doesn't make any sense.

At that point, if you don't want the company to collapse and your career collapse, taking the initiative to withdraw is almost an inevitable choice.

As for whether it can make a comeback after quitting, it is another story.

All this stems from the method Zhao Ziming chose this time-"hostile takeover."

The difference between a hostile takeover and a bona fide takeover is whether the board of directors and management will be contacted in advance.

A hostile takeover is generally done without contacting the management, or even deliberately carried out secretly.

As Zhao Ziming did, he used various methods to slowly collect ARM stocks, and after reaching a 5% ratio, he publicly developed a tender offer in the market.

The content of the offer is similar to: I want to buy 40% of the company's shares at a price of 25 yuan per share, valid for 2 months and so on.

There are two methods of hostile takeover. One is to directly purchase a large number of company stocks, or even 100% of the entire stock, to occupy the right to speak.The second is to acquire a certain amount of stocks, gain a certain right to speak, and then influence the board of directors and other shareholders, and then slowly replace the board of directors and management with their own people, and ultimately achieve the goal of controlling the company.

Since it is a hostile takeover, it is naturally unpopular.

Of course, in addition to being unpopular, there are many disadvantages.

For example, the cost is often more expensive than a well-intentioned acquisition.

Because a bona fide acquisition is generally approved by the board of directors and management, they will act as a "persuader" to tell shareholders, large and small, why they should agree to the acquisition, and shareholders are more easily persuaded.

Hostile takeover offers, without the support of management, often have to use money to smash minority shareholders. At this time, the cost of acquisition will also increase a lot.

And correspondingly, the risk increases.

Once the acquisition fails, the huge short-selling orders of hedge funds can wipe out the cost of Zhao Ziming's early investment.

ARM is valued at 25 billion, and the funds that will eventually be affected may be about 40 billion. Zhao Ziming naturally does not have so much cash flow. All funds come from mortgage loans and bridge funds.

Once it is short, an avalanche effect will inevitably form, sweeping all companies under its name.

Many people are curious as to why Zhao Ziming is so stupid to choose a hostile takeover.

Even the management of the digital group, many people are puzzled.

Choose a non-hostile acquisition and negotiate with the leadership of ARM in advance. Even if it is unsuccessful, it will not lose too much and hurt the bones.

Some people even think that hostile takeover is not in line with Zhao Ziming's long-standing glorious image, and it is easy to leave a bad impression on foreign friends.

Whether it is strategically or morally speaking, this malicious merger is definitely a big failure.

Of course, although hostile takeover is unpopular, it does not mean right or wrong. There is nothing right or wrong.

Both acquisitions and reverse takeovers are means.

In the business world, tools are neither well-intentioned nor malicious, they are unintentional.

It does not have any preference or orientation for good or evil, but just operates according to its own laws.

In other words, Zhao Ziming chose a hostile takeover. There is no excuse worth attacking on the moral level.

As for whether it is wise, the benevolent sees benevolence, and the wise sees wisdom.

The focus of everyone’s attention is, can it work?

One foot in heaven, one foot in hell.

Zhao Ziming has never experienced it so deeply, it’s as simple as winning and losing.