Mobileye Shares Tumble on Intel's Potential Stake Offload
Mobileye's Record Low Share Value
Mobileye Global, an autonomous driving company based in Israel, saw its shares plummet to a record low in New York on Friday. This followed a Bloomberg report that suggested Intel, the majority stakeholder in Mobileye, might be considering reducing its stake in the software company. The report indicated that Intel could either sell some of its shares on the public market or to a third party. This news comes amidst ongoing internal issues at Intel, as CEO Pat Gelsinger prepares to present a turnaround plan to the company's board of directors.
Intel's Potential Offload of Mobileye Stake
Intel, which holds an 88% stake in Mobileye, could potentially sell some of its shares on the public market or to a third party, according to anonymous sources cited in the Bloomberg report. These plans will reportedly be discussed at a Mobileye board meeting in New York later this month. Mobileye specializes in software and hardware for self-driving systems. Last year, Intel sold a $1.5 billion stake in the company.
Mobileye's Market Performance
Mobileye's shares have plummeted nearly 73% this year. Any further selling by Intel on the public market could push the share value even lower. As of Friday morning, Mobileye's market cap stood at around $9.56 billion, with about 14.5% of the company's float, or approximately 13.4 million shares, being short.
Mobileye's Financial Struggles
In August, Mobileye had to revise its annual revenue and profit forecasts downwards due to a decrease in demand for its driver-assistance chips in China. A global slowdown in the automotive market, including electric vehicles, has resulted in fewer orders for Mobileye's chips. Additionally, a sluggish economic recovery in China and slowing growth in the US have negatively impacted Mobileye.
Intel's Turnaround Plan
Last month, Bloomberg reported that bankers from Morgan Stanley and Goldman Sachs were advising Intel on potential strategies to halt the decline in its market cap. These strategies included splitting the chipmaker's product design and manufacturing businesses. A separate report from Reuters this week suggested that Intel's plan could involve cost-cutting measures such as selling businesses that it can no longer support due to dwindling profits, like the programmable chip unit Altera. Intel's CEO and senior executives are expected to present a turnaround plan to the board of directors in mid-September.
Bottom Line
The potential offloading of Intel's stake in Mobileye has undoubtedly sent shockwaves through the market, leading to a significant drop in Mobileye's share value. The implications of this move, coupled with the ongoing challenges at Intel and within the global automotive market, raise several questions about the future of these companies. What are your thoughts on this development? Feel free to share this article with your friends and sign up for the Daily Briefing, which is available every day at 6pm.
