Intel Plans Potential $50 Billion IPO For Its Israeli Self-Driving Car Unit, Shares Rise

Intel Plans Potential $50 Billion IPO For Its Israeli Self-Driving Car Unit, Shares Rise

Topline

Shares of chipmaker giant Intel, which have largely underperformed so far this year, rose by more than 4% Tuesday after the company announced plans to take its self-driving car unit public in 2022 at a potential $50 billion valuation.

Key Facts

The tech giant said that it would take its self-driving car firm, Mobileye, public next year at a potential valuation of more than $50 billion, sources first told The Wall Street Journal.

Intel originally acquired 100% of the Israeli company in 2017 for $15.3 billion, but valuations for self-driving car companies—much like those of electric vehicle makers—have skyrocketed in recent years amid massive interest from investors.

The chipmaker intends to maintain majority ownership in Mobileye following an initial public offering, with the two companies also continuing as strategic partners, according to a company press release Monday. 

Shares of Intel, which have largely slumped in recent years, jumped as much as 8% on the news before paring back gains somewhat—with the stock currently up around 4% on Tuesday.

Intel CEO Pat Gelsinger, who took over the top job in February, added in a statement that Mobileye’s annual revenue is expected to grow more than 40% in 2021.

Mobileye’s planned public offering is the latest effort from Gelsinger to turn the company around and expand into new markets, as Intel has faced pressure from investors after several years of lackluster performance.

Crucial Quote:

“Intel’s acquisition of Mobileye has been a great success,” said Gelsinger. “An IPO provides the best opportunity to build on Mobileye’s track record for innovation and unlock value for shareholders.” 

Surprising Fact:

Intel’s stock is up more than 6% so far in 2021, rising slightly but vastly underperforming when compared to other chipmakers like Nvidia, which has seen shares surge 140% this year.

What To Watch For:

“We think the move makes sense as it increases focus on Intel’s core business and raises capital,” according to CFRA analyst Angelo Zino. The move will unlock shareholder value “given the investment community appetite within this category,” he argues. “Despite the near-term catalyst, we are hard-pressed to get enthusiastic on the Intel story given ongoing share loss, margin compression, uncertain PC landscape and high capex spend needs.”