Author: George Gate

The advanced driver-assist company, Mobileye, is now targeting an IPO offering to place its entire stock value at $15.9 billion. Intel, its parent company, expects the share price to go no lower than $18 and further than $20. 

Intel’s Mobileye Targets $15.9 Billion Valuation In IPO

Intel’s self-driving division Mobileye is targeting an IPO that would place the company’s value at almost $16 billion. In a filing released last Tuesday, Intel expects the stock offering to receive a price between $18 and $20 per share.

The price, significantly lower than initial expectations, is another sign that the IPO market is slowly cooling off as interest rates spike and investors brace themselves for the potential global recession. 

With the strong-going bear market, there isn’t a more awful time for companies to move public than now. IPO offerings have fallen by almost 80% compared to this same time last year. Nonetheless, Intel is willing to go through with Mobileye’s IPO, which will send the self-driving company’s stock down by over 3%

Even though Mobileye’s IPO offering isn’t going to fetch as much money in the current market compared to the amount it would have made in the quantitative easing bubble of early 2021 and late 2020, Intel desperately requires capital to finance the expansion of its capital-dependent semiconductor manufacturing business.

Intel intends to raise as much as $820 million to cover corporate costs and serve as working capital. The company will retain control of Mobileye and possess more than 750 million shares of Class B stock, which holds 10x more voting power than Class A stock (Class A stock is what investors are purchasing in the IPO).

Intel anticipates that at least 46.26 million outstanding Class A stocks will be available, with possibilities for more if the underwriters decide to own additional shares in the offering. Intel will exchange Mobileye’s stock through the Nasdaq market, which has been down by over 30% this year.

In its entirety, the company expects at least 796.26 million outstanding Mobileye stock. When priced at $20, will place the valuation of Intel’s self-driving subsidiary at $15.9 billion.

A Fresh Opportunity For Growth

Amidst the ongoing global chip crisis, the U.S is providing local companies with financial subsidies to operate semiconductor production plants on national soil. These facilities, which produce semiconductors for both their companies and others, are referred to as fabs.

During the last few decades, the nation has continually contracted chip production to fabs from other countries intending to maximize more-efficient processes and cheaper labor costs to the nation’s interests. International trade for semiconductors isn’t the best idea.                                                                                                                                                                                                                                          

Intel aims to take full advantage of this opportunity by using the proceeds from Mobileye’s IPO to restore growth and expand its offering with additional factories to enable them to meet the demands of more companies in the market for semiconductors.

Founded in 1999, Mobileye manufactures chips, software, and hardware for self-driving vehicles and autonomous driving capabilities such as driver assistance and lane-keeping technologies. 

Mobileye now has multiple partnerships with high-name automakers such as BMW, Audi, and Volkswagen, with its technologies being utilized in over 800 car vehicle models, according to its IPO filing.

The IPO filing indicates that Mobileye’s revenue has soared from $879 million in late 2019 to over $1.3 billion in 2021. Based on Intel’s second-quarter earnings report, Mobileye made $854 million in the first half of 2022, with an operating loss of $36 million and a gross loss of $67 for the same period.

Final Word

While the lower-than-projected proceeds from Mobileye’s IPO spell bad for Intel, it is worse for Intel to keep a money-burning company in its balance books. 

Right now, the California-based company finds itself strapped for working capital, and reinvesting the revenue from this offering could potentially equate to growth and development in the parent company.

Additionally, potential investors can maximize the discounted share price resulting from Mobileye’s poorly timed return to the public markets.