Mohit Oberoi
Intel (NYSE: INTC) has announced the terms of Mobileye IPO which would value the autonomous driving company at just under $16 billion. The proposed valuation is a third of what Intel was previously aiming at.
Intel has kept the pricing for Mobileye IPO between $18-$20 and intends to offer 41 million Class A shares in the IPO. At the top end of the price range, the company would raise gross proceeds of $820 million from the IPO. Morgan Stanley, Goldman Sachs, Citigroup, and BofA Securities are among the underwriters for the IPO.
Mobileye has a dual share structure. While Class A shares are entitled to one vote per share, Class B stockholders are entitled to 10 votes per share. It is quite common for companies to have a dual share structure as they give management control. After the IPO, Mobileye would have 46.26 million Class A shares and 750 million Class B shares.
Here it is worth noting that Intel might change the pricing for the IPO before the final listing. When the US IPO market was booming in 2020 and 2021, it was quite usual for companies to bump up IPO prices during the process. However, 2022 has been a different ballgame for IPOs as well as SPACs (special purpose acquisition companies).
Companies that went public through SPAC reverse mergers have fared particularly poorly and many of them have fallen over 80% from the IPO price. Even Polestar, which was the rare EV (electric vehicle) startup to have functional models on the ground before going public, is down over 50% from the IPO price.
US IPO Market Has Been Dead in 2022 amid Marco Turmoil
Renaissance IPO ETF, which invests in newly listed companies, is down by over half this year. The ETF’s performance is a testimony to how IPOs have fared this year. The ETF outperformed the markets in 2020 but is now down sharply from its all-time highs.
The US IPO market has been almost dead this year as investors have been cold to new listings due to the mayhem in growth stocks. However, there is still investor interest in some of the upcoming IPOs like Instacart. We have a list of some of the upcoming IPOs.
Intel to Price Mobileye at $16 Billion amid Growth Stock Slump
Intel bought Mobileye in 2017 for around $15.3 billion. The nearly $16 billion valuation that it is now seeking for the business is only a tad above what it had acquired the company for. However, the markets’ perception of growth assets has taken a hit amid the Fed’s rate hikes.
Given the turmoil in public markets, valuations of private startup companies have also come down. Some of the biggest valuation cuts have come in Alibaba-backed Ant Financial and fintech startup Klarna. TikTok-parent ByteDance’d valuation has also come down. ByteDance is however still the most valued startup company despite losing billions of dollars last year.
Coming back to Intel, along with the scaled-down valuation for Mobileye, the company is also battling a slowdown in chip sales. Intel is reportedly looking to fire thousands of employees. It is expected to announce the layoffs on October 27 when it reports its third-quarter earnings.
Intel Stock Fell to Multiyear Lows amid the Chip Industry Slowdown
The chip industry slowdown has only worsened over the last couple of months. Multiple companies have warned of slowing growth. In August, Nvidia guided for revenues of $5.9 billion in the fiscal third quarter, which was over $1 billion lower than what analysts were expecting. AMD also issued a profit warning earlier this month.
It released the preliminary earnings for the third quarter and said that its revenues were $5.6 billion in the quarter, which was $1.1 billion below the midpoint of its previous guidance. AMD’s CEO Dr. Lisa Su said, “While our product portfolio remains very strong, macroeconomic conditions drove lower than expected PC demand and a significant inventory correction across the PC supply chain.”
Intel shares tumbled to a multi-year low amid concerns over chip demand. The tepid valuations for Mobileye valuations are not helping matters for the chipmaker which is still looking to invest billions of dollars in the US to ramp up chip production.
All said Mobileye listing would help Intel unlock the value. The company might look at offloading more shares in the future to monetize its investment.
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This article was written for Business 2 Community by Mohit Oberoi.
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