Autonomous driving company Mobileye has priced its long-awaited initial public offering of shares, but at a company valuation of less than $16 billion; much lower than previously expected.
Chipmaking giant Intel acquired Mobileye in 2017 for US$15.3 billion and has run it as wholly-owned subsidiary since then. The prospectus reveals that Mobileye has been making losses for the last three years.
Intel had recently lowered the expected valuation placed on Mobileye to $30 billion from figures as high as $50 billion in April. The market’s appetite for IPOs has largely gone away in 2022 due to the poor macroeconomic outlook driven by US-China geopolitical tension and the Russian invasion of Ukraine.
Softbank Group is another parent struggling with a plan to launch the IPO of a supposedly valuable subsidiary (see SoftBank courts Samsung to form ‘strategic alliance’ with Arm).
Nonetheless Intel and Mobileye are pressing ahead with the IPO. It is now proposed to sell 41 million shares in Mobileye Global Inc. at a price of between $18 and $20 per share. This would raise between $738 million and $820 million or approximately $900 million if the underwriters exercise their option to purchase additional shares of Class A common stock in full.
The shares sold would only represent 5.8 percent of Mobileye with the remaining 94.2 percent retained by Intel. As such the pricing would value Mobileye at between $12.7 billion and $14.2 billion, or $15.9 billion if the over-allotment of shares is exercised. Therefore Intel could well be showing a loss on this early tranche of shares sold
Mobileye said in the filing that it intends to use the proceeds of the IPO to pay down part of a debt it owes to Intel. This could be as much as $600 million or $700 million depending on the price achieved and subject to other conditions within a Master Transaction Agreement.
Losses and not enough chips
In the prospectus it is notable that Mobileye has been growing but lossmaking. In the years 2019, 2020 and 2021 Mobileye had revenues of $879 million, $967 million and $1.4 billion, respectively. On these revenues Mobileye made net losses of $328 million, $196 million and $75 million, respectively. The loss is on-track to be larger in 2022 on increased revenue.
The prospectus also confirmed that all of Mobileye’s EyeQ chips are made by STMicroelectronics, which in turn has them manufactured by foundry supplier TSMC.
The prospectus said that during 2021 and through the 1H22 STMicroelectronics was not able to meet the demand for EyeQ SoCs, “causing a significant reduction” in the inventory level. Mobileye said it expects the shortfall of chips to continue during 2H22.
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