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IPO of Mobileye unit is showing zero uplift under Intel’s stewardship

Autor: Article based upon analysis from Reuters Breakingviews | Link: Mobileye sees IPO market with surprising clarity
Timp de citit: 2 minute

Intel’s self-driving subsidiary, Mobileye, is targeting an IPO that would value it at nearly $15 billion. That would be about the same valuation the chipmaker originally paid five years ago, when Israeli subsidiary was bought.

While Mobileye has experienced a fast growth, there are factors that discourage investors. The subsidiary, although unprofitable, saw its revenue increasing by 43% last year, to about $1.4 billion.

It nearly sustained that growth in Q3 2022. CEO Amnon Shashua expects that Mobileye’s driver-assistance systems will gather $270 million by 2030, and there is back-up for this.

Existing “design wins” and the fact that its technology has been used in 125 million vehicles worldwide are strong proof.

Last December, the subsidiary was valued at $50 billion, but soon enough things took a turn for the worse.

This year, Intel shares dropped by more than half, and its specially unappealing ownership structure doesn’t help either to the IPO.

The post-pandemic euphoria was clearly over last month, showing a market pessimism that revised Intel’s target at $30 billion.

The reality since Tuesday is even darker, showing that Mobileye would return to the market worth just $15 billion, implying zero uplift under Intel’s stewardship.

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A few things dragged the subsidiary down, all of them having their source in Intel, apparently. Intel is keeping a firm grip on Mobileye with special voting stock typically reserved for entrepreneurs rather than corporate parents.

These kinds of structures are discouraging to investors, adding to their shifting attitudes away from high-flying tech.

Intel could wait a while to digest the new reality, but it cannot afford to do so. The company slashed its annual sales forecast in July because of weaker demand for PC microchips.

It also has been plagued by manufacturing problems and capital expenditures exceeded cash from operations last year.
Intel is currently going through a transformation in its core business of making computer chips. It’s building additional factories to become a manufacturer for other companies.

But building and outfitting new facilities is capital intensive. This may mean the chipmaker will have to accept what the market has to offer these days.