The Hertfordshire-based chip designer appears to be falling out of favour with one of its more likely buyers. Tsinghua Unigroup, a state-backed tech holding company which is part of Tsinghua University, revealed on 16 June that it had sold a near 0.7m slug of shares in Imagination Technologies (IMG), taking is stake below the 3% threshold which requires public markets notification.
Imagination has developed cutting edge expertise and intellectual property (IP) over several decades in graphics display. It’s technology goes into graphic processing units (GPUs) that give TVs, computers and, crucially smartphones, ultra-sharp pictures and images. Think high and ultra-definition quality.
Smartphones are crucial to Imagination because of the sheer volume of handset sales globally each year. Market researchers at Gartner estimate 1.5bn handsets were sold worldwide in 2016.
Imagination is in the middle of an IP battle with tech giant Apple, which announced plans to stop using the UK firm’s technology in its iPhones and iPads. That’s forced Imagination into a root and branch rethink of its business, not to mention triggering a collapse in the UK company’s share price in April.
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Tsinghua Unigroup has ambitions to become the biggest chip maker in the world and part of its expansion strategy included taking a 3% stake in Imagination a little over a year ago. That sparked speculation that the Chinese fund was building a strategic stake with a view to a full blown buyout at some point.
Those hopes now seem to be fading, with Imagination shares losing more than 4% of their value on Monday. That leaves the stock at 122p levels, valuing the business at about £311m. The shares had traded at highs in excess of 600p inside the past five years.