Intel’s Mobileye lowers IPO valuation to below $16 billion

Intel announced on Tuesday that it had a maximum valuation of less than $16 billion for its Mobileye autonomous driving unit to go public.

Mobileye hopes to sell its shares for $18 to $20 a share, which translates to a value of $14.3 billion to $15.9 billion, well below the $50 billion Intel was reportedly aiming for when it first announced a plan to take Mobileye public a year ago. The US chipmaker paid $15.7 billion to buy the unit in 2017 and has since become one of the struggling company’s best-performing businesses.

The deal is said to be the first major tech IPO since January and is being watched closely for signs of investor appetite for more listings. The US IPO market has stalled this year due to a combination of economic and geopolitical uncertainty, market volatility and particularly poor performance from recently listed companies.

The IPO comes at a critical time for Intel as it faces significant financial strains from increased investment to regain the chip manufacturing leadership it lost to TSMC. The maximum sales proceeds of 820 million US dollars will hardly ease the financial pressure.

Mobileye has said it will use an unspecified amount from the IPO to repay part of the $3.5 billion Intel loaned it and use the rest as working capital. Intel has agreed to convert the unpaid portion of Mobileye’s debt into equity. The chipmaker has claimed the IPO is being undertaken to “unlock value for its shareholders” rather than improve its own finances, and recently agreed a novel deal that would raise $15 billion in private equity to boost its manufacturing plans to support.

Founded in Israel in 1999, Mobileye initially focused on manufacturing “collision avoidance” technology, but has since expanded its focus to enable “fully autonomous driving.” As a result, it lists competitors ranging from specialist automotive suppliers like Bosch and Continental to automakers like Tesla and big tech giants like Apple and Didi Chuxing.

Chief Executive Amnon Shashua co-founded Mobileye and continued to lead the group after the acquisition. However, the company noted in its prospectus that Shashua “does not devote his full time and attention to our company,” serves as chairman of three other companies, and teaches at the Hebrew University of Jerusalem.

Mobileye reported revenue of $1.4 billion in 2021, up 43 percent from 2020 and up 57 percent from the year before the coronavirus pandemic. The company is making losses, but net losses shrank to $75 million last year, from $196 million in 2020 and $328 million in 2019.

Bankers and investors have stressed that companies attempting to go public after the recent downturn should at least be able to show a clear path towards profitability, unlike in recent years when many companies were vying for each other Price focused on revenue growth.

Like much of the auto industry, Mobileye has been hit by a semiconductor shortage since the pandemic began, and the company said in the prospectus that it “foresees[s] that such bottlenecks will continue”.