Mobileye IPO

Intel (INTC) shares rose after the company confirmed plans to take its subsidiary Mobileye, a developer of technology for unmanned cars, to an IPO in mid-2022.

Intel (INTC) shares, up just 5.5% since the start of 2021 and lagging far behind the average growth in semiconductor stocks (Philadelphia SE Semiconductor (SOX) index is up 42.7% YTD), closed up 3.1% on Tuesday and were up 3.55% on Monday.

On Monday, Intel confirmed the announcement of the Mobileyes subsidiaries public in mid-2022.

Mobileye is a provider of advanced automotive security systems, which Intel bought in 2017 for about $15 billion.

Mobileye supplies systems to over 30 major car manufacturers worldwide (BMW, Audi, Volkswagen, Nissan, Honda, General Motors), and recently shipped 100-millionth units of EyeQ Crystal. Mobileeye EyeQ-equipped, driverless cars will be available to taxi drivers in Tel Aviv and Munich next year.

The company is expected sales to grow by 40 per cent In 2021 compared to 2020.

The Wall Street Journal, citing Intel insiders, reported that Mobileye's valuation could exceed $50 billion.

According to Intel, the IPO would give Mobileye a greater degree of independence as well as help it raise its business profile in the automotive industry and attract customers.

Market analysts have welcomed Mobileye's IPO plans, pointing out that with a 100% stake in Mobileye, Intel can devote some of the funds raised to its own development.

Intel is in dire need of investment for its plans to build two new plants in the US to become a bigger player in contract manufacturing and catch up with its competitors.

In October, Intel announced plans to spend an estimated $25 billion to $28 billion to build additional manufacturing facilities.

Analysts have doubts about Intel's ability to finance such large capacity expansion programmes.

In October, BMO Capital Markets analyst Ambrish Srivastava downgraded Intel's stock, noting that he was concerned about Intel's financial position amid its massive expansion plans.

Given that Intel will retain a controlling stake in Mobileye and receive "most of the proceeds" from the IPO, the company may be able to divert funds towards building factories.