Shares in Imagination Technologies dropped in mid-morning trading after Apple said it was unlikely to bid for the British tech firm.
The stock had fallen 4.6 per cent to 150p at the time of writing.
Imagination and Apple are currently in a dispute over Apple's announcement in April that it would no longer need to use the smaller company's intellectual property. Imagination provides technology used in the iPhone and its stock crashed by more than 60 per cent when Apple said it would be pulling the plug in the near future.
However, Apple now claims it informed Imagination in 2015 that their agreement would come to an end, according to a report by Bloomberg.
“We began working with Imagination in 2007 and stopped accepting new IP from them in 2015," Apple said. "After lengthy discussions we advised them on February 9 that we expected to wind down our licensing agreement since we need unique and differentiating IP for our products. We valued our past relationship and wanted to give them as much notice as possible to adapt their future plans."
A source also told Bloomberg that Apple was "unlikely" to make a bid for Imagination. The London-listed firm put itself up for sale last month.
Imagination declined to comment.