Mobileye IPO: Why the spin-off is significant for Intel (INTC)

After several weeks of muted IPO activity, Wall Street is getting ready for probably a blockbuster listing that is expected to enliven the market. Around five years after acquiring self-driving technology company Mobileye for a whopping $15 billion, Intel Corporation (NASDAQ: INTC) is all set to take the Israel-based company public. It will mark Mobileye’s return to public markets.

Major Deal

Recently, Mobileye confidentially filed for an initial public offering in the U.S., which according to unofficial reports would value the company at $50 billion. Details of the offering, which is expected to close mid-year, such as the number of shares and offer price are not known yet. Intel’s management had earlier hinted that the tech giant would receive the lion’s share of the proceeds, which would be used for setting up new production facilities and expanding capacity at existing plants.

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It is going to be one of the biggest public listings of the year. The spin-off is part of the chipmaker’s efforts to revitalize the core business by streamlining operations. The initiative will allow it to focus more on key areas that need attention, while Mobileye would become a stronger and more independent player. The latter’s clientele includes industry leaders like General Motors Co. (NYSE: GM), Honda, Nissan, and BMW.

Majority Stake

Post-IPO, Intel is expected to retain its majority stake in Mobileye and position it to further expand in the rapidly growing autonomous vehicles industry. The announcement comes at a time when IPO activity – which reached a peak last year – dropped to dismal lows amid falling investor sentiment due to macroeconomic uncertainties and concerns over the Russia-Ukraine war. The recent market selloff has added to investors’ worries.    

“Paris is the latest in a list of locations where Mobileye is piloting autonomous vehicle test fleets, including New York, Munich, Detroit, Tokyo, Israel, and China. Looking ahead, we still expect to launch commercial Robo-taxi services in Munich and Tel Aviv in 2022. As we announced in December, we are working to take Mobileye public to unlock shareholder value. We are making good progress and we’ll share more as we go through the year,” said Intel’s CEO Patrick Gelsinger during his post-earnings interaction with analysts a few months ago.

Self-driving Shift

Of late, investor interest in self-driving technology companies has been growing steadily, buoyed by technological advancements that brought the concept of driverless vehicles closer to reality. Mobileye would be looking to tap into this opportunity and grab a bigger share of the autonomous transportation pie.

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Read management/analysts’ comments on Intel’s Q4 2021 earnings

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It is worth noting that legacy automakers like GM and Ford Motor Company (NYSE: F) are investing heavily in technologies like hands-free driver assistance systems and autopilot, signaling that driverless vehicles might become mainstream in the coming years.