Intel seeks $3.5b from Mobileye despite sluggish IPO market

Published date03 October 2022
Publication titleGlobes (Rishon LeZion, Israel)
If the company does succeed in an offering despite the difficult market conditions, which is by no means certain, it could become the biggest IPO of the year in New York. In Germany last week, car maker Porsche raised €8.2 billion in an offering at a valuation of €72 billion

Mobileye develops ADAS (advanced driver assistance systems), and technological solutions for autonomous vehicles. The company was founded in 1999 by Prof. Amnon Shashua, who serves as its CEO, and Ziv Aviram. In 2014, Mobileye was floated on the New York Stock Exchange at a valuation of $5.3 billion, and in March 2017, when its market cap stood at $10.5 billion, it was acquired by Intel for $15 billion. For its second round on Wall Street, Mobileye is being accompanied by no fewer than 24 investment banks, headed by Goldman Sachs and Morgan Stanley.

Mobile has not yet announced how much money it seeks to raise in the offering, but a substantial part of the proceeds will go to Intel, which seeks to raise funds for its other activities; in short, Intel wants cash.

Intel will not offer Mobileye shares for sale, but according to the prospectus Mobileye has undertaken to pay it a sort of dividend (Mobileye is a loss-making company with no accumulated profits) of $3.5 billion out of the proceeds of the offering. Last May, Mobileye paid Intel $336 million; that sum too was described as a dividend.

In practice, the $3.5 billion is a liability that Mobileye owes Intel and that bears interest at an annual rate of 1.26% (incurring an expense of $9 million for Mobileye in the first half of 2022). On its reporting date of July 2, Mobileye had cash and cash equivalents of $774 million.

After the expected payment to Intel, Mobileye's shareholders (who will include external investors after the flotation) are not expected to benefit from dividends, and the company emphasizes that it intends to retain future profits and not to distribute dividends in the foreseeable future.

$67 million first half loss

The prospectus shows that in the first half year, ending on July 2, Mobileye's revenue grew by 21.3% in comparison with the first half of 2021, reaching $854 million. On a GAAP basis, the company's gross profit margin fell from 49% of revenue to 47%. On a non-GAAP basis, excluding various accounting items, the drop was from 78% to 76%.

Because of growth in R&D expenses , operating expenses rose by 29.3% to $441 million, and so from an operating profit of $7 million in the first half of 2021, Mobileye...

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