Mobileye Global Inc (NASDAQ:MBLY), which develops autonomous driving (AD) and driver-assistance technologies, announced the pricing of its stock sale that will help its majority owner Intel (NASDAQ:INTC) to keep funding its expensive turnaround story. Earlier this week, the AD business said it intends to offer 35 million of its Class A common stock owned by Intel. Underwriters, which include Goldman Sachs and Morgan Stanley, have a 30-day option to purchase up to an additional 5.25 million shares of Mobileye’s Class A common stock.
“Mobileye is not selling any shares of Class A common stock in the offering and will not receive any proceeds from the sale of the shares being offered by the Selling Stockholder,” the Jerusalem-based company said in a press release.
Two days later, Mobileye said it will sell 38.5 million shares at a price of $42 apiece. Intel is expected to generate over $1.6 billion in proceeds, excluding fees.
Due to the higher interest in Mobileye shares, the underwriters have been given a 30-day option to purchase up to an additional 5.775 million shares. Mobileye had 90.7 million outstanding shares as of June 05. Mobileye shares initially fell in early Tuesday trading before recovering to test the channel resistance, which is located around the $44 mark. A break of this channel would open the road for Mobileye shares to rally towards fresh record highs near the $50 handle.
Using Momentum in Mobileye Stock
The MBLY stock offering is expected to be finalized by June 12. The announced price represents a 3.49% discount to Mobileye’s closing price on Wednesday, 07 June. Despite a discount, Intel is evidently looking to use momentum in Mobileye stock, which rose 11.5% in the past month. Shares are up 24.1% year-to-date as investors seek to increase their exposure to companies that build next-gen technology products.
Intel's monetization of its stake in Mobileye was fully expected after the post-IPO lock-up period came to an end in late April. The chipmaker spent $15.3 billion to acquire the Israel-based startup in 2017. After more than 5 years, Intel decided to facilitate an initial public offering (IPO) for Mobileye, whose stock rallied 37% on its first day as a public company. Intel priced the IPO at $21 per share, valuing the AD company at around $17 billion. This is significantly below the expected $30 billion, which Bloomberg News said Intel’s projections were at in September 2022.
The price was higher than expected after Intel initially said it aims to price the offering at between $18 and $20 per share. Owners are usually advised to pursue a lower IPO price to generate higher interest. The company’s stock collapsed in late April after Mobileye cut its full-year sales forecast, citing a slowdown in demand for electric vehicles (EVs) in China. Mobileye said it now sees annual revenue at $2.09 billion, lower than the prior forecast of $2.235 billion.
“Due to a number of headwinds lowering EV demand in China, we have reduced our 2023 SuperVision shipment forecast which is negatively impacting our annual financial guidance,” the company said.
For the first quarter, the AD business reported sales of $458 million. The company also posted a profit of 14 cents, higher than the analyst estimate of 12 cents.
Funding Expensive Turnaround
Intel seeks to raise $861 million and said it will use the IPO proceeds to invest in chip-making facilities as it continues to pursue its ambitious turnaround story. CEO Pat Gelsinger wants Intel to become a foundry for other chipmakers. Last week, Nvidia (NASDAQ:NVDA) CEO Jensen Huang hinted that Intel may build future GPUs after he received “good” results for an Intel test chip.
"We're open to manufacturing with Intel. And [Intel CEO] Pat [Gelsinger] has said in the past that we're evaluating their process, and we've recently received the test chip results of their next generation process and the results look good...You know that we also manufacture with Samsung (KS:005930), and we're open to manufacturing with Intel. Pat [Gelsinger] has said in the past that we're evaluating the process, and we recently received the test chip results of their next-generation process, and the results look good," Huang said.
These comments come after Intel posted its biggest quarterly loss in its history. Revenue fell as much as 36% to $11.7 billion amid a sharper-than-expected downturn in PC demand. As a result, Intel reported a net loss of $2.8 billion, which compares to an $8.1 billion net profit reported for the year-ago period.
“We still have more work to do as we reestablish process, product, and cost leadership, but we continue to provide proof points each quarter,” Gelsinger said on an earnings call. Investors were particularly concerned that the company’s chip division, which builds Data Center and AI products, saw its sales fall 39% to $3.7 billion.
Intel is in stark need of cash after it announced last year it plans to spend $20 billion to build two new factories and to establish a new epicenter for advanced chipmaking in the Midwest. Moreover, the chipmaker said it plans to invest as much as €80 billion in Europe to create the entire value chain, from R&D to manufacturing.
Summary
Intel announced it intends to sell 38.5 million of Mobileye’s common Class A stock to raise over $1.6 billion. The raised funding will act as a boost to the company’s efforts of building more chip factories to rival other chipmakers, including Nvidia and AMD. The new funding is needed as the company’s core businesses continue to slow down given the weaker-than-expected PC demand environment.
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Disclaimer: Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.