When it was announced earlier this year that Cambridge-headquartered chip design firm ARM Holdings (ARM:NASDAQ) was coming back to the stock market, there was a great deal of anticipation among UK investors.

But first they were dealt the disappointing news there would be no London listing for a big British tech success story and now another blow has been delivered.

Anyone who had owned the shares prior to the company’s £24.2 billion takeover by Japanese investment holding company Softbank (9984:TYO) in 2016 would have enjoyed large profits.

However, for someone who wants to buy the shares today in the hope of further gains, the process isn’t quite as simple as it once was, as we will explain.

Originally, Softbank had planned to sell ARM to US chipmaker Nvidia (NVDA:NASDAQ) in 2020 for around $80 billion but the US Federal Trade Commission blocked the deal on the basis it would hurt competition in the market for AI chips and those used in self-driving cars.

The UK and the European Union also said they would scrutinise the Nvidia deal, at which point Softbank opted for a public offering in the US where it hoped it would achieve a higher profile and a higher rating for ARM than if it floated on the UK market.

Softbank argued the UK wasn’t doing enough to attract tech companies, so it didn’t bother with a secondary listing here and floated the shares on Nasdaq instead in the form of ADRs.

ADRs, or American Depository Receipts, are certificates issued by a US depository bank representing a fixed number of shares in an overseas company, usually on a one-for-one basis, allowing US investors to buy stocks which otherwise wouldn’t be available to them without the company having to list directly on a US exchange.

UK investors can still buy ADRs – including ARM – through a dealing account or a SIPP (self-invested personal pension), but not through an ISA (individual savings account).

The reason for this distinction is the underlying shares represented by the ADR aren’t themselves listed on a regulated exchange, and therefore under HMRC rules they do not qualify as an ISA investment in their own right.

Shares contacted ARM’s public relations team to ask whether there was any plan to list the company’s shares directly on the UK stock market at some point, to make life easier for domestic investors.

The firm’s response was as follows: ‘ARM chose to list in the US because that is where our semiconductor peers are listed. We have listed ADRs because we are a company incorporated under the laws of England and Wales listing in the US. We are open to considering a secondary listing in the UK in the future.’

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