Mobileye IPO: Intel’s Self-driving Company Is Going Public

Earlier this month, it was revealed that Mobileye, a company owned by semiconductor giant Intel (NASDAQ: INTC) is going public. Mobileye designs and develops chips, maps, and software for self-driving vehicles and filed for an IPO, according to a prospectus with the Securities and Exchange Commission or SEC last Friday. 

The SEC filing indicates MobilEye has increased sales to $1.39 billion in 2021, from $967 million in 2020 and $879 million in 2019. In the first six months of 2022, its revenue grew to $754 million, an increase of 21% year over year. 

Similar to most companies part of this disruptive industry, Mobileye remains unprofitable. But, its net losses have narrowed to $75 million from $328 million in this period. 

Can Mobileye allow Intel stock to stage a turnaround?

Intel expects the Mobileye listing to allow its core business to stage a turnaround. In fact, Intel pumped in $15.3 billion to acquire MobilEye in 2017 and later announced plans to take the company public. The acquisition was then seen as part of a push into new market segments, and Intel described it as “confronting ongoing stagnation in the personal computer business that served as its cash cow for decades.”

Intel confirmed it will use a part of the proceeds derived from the Mobileye IPO to build additional chip foundries as it now aims to become a manufacturing hub for other chipmakers. 

Mobileye was founded back in 1999 and has since partnered with leading automobile giants, including General Motors (NYSE: GM), Ford (NYSE: F), BMW (OTC: BWMYY), Audi, and Volkswagen (OTC: VWAPY), where the former developed driving and safety features like driver assist and lane-keeping, leveraging the functionalities of the EyeQ camera and software. 

In the SEC filing, Mobileye claimed that 50 companies use its proprietary technology in more than 800 vehicle models. While the filing states Mobileye is planning to list Class A common stock, the number of shares or the price range for the offering is yet to be disclosed. 

Intel will continue to have control over Mobileye’s board and executive decisions as the semiconductor giant will maintain ownership of Class B shares that have 10x the votes of Class A shares.

Will the Mobileye IPO be successful?

Last December, Intel stated it plans to launch an IPO for Mobileye at a valuation of more than $50 billion. So, in case Mobileye’s sales surge to $1.5 billion in 2022, the stock will be valued at 33.3x forward sales, which is quite steep. In fact, a prior document filed with the SEC in Q1 of 2022 also mentioned the $50 billion valuation. 

But the equity markets have experienced a massive sell-off this year. As inflation has surged to 40-year highs, central banks are willing to risk the possibility of a recession by raising interest rates significantly in the last three quarters. The ongoing war between Russia and Ukraine has further strained supply chain constraints globally, making the sky-high valuation an unlikely proposition. 

Intel now expects to be chasing a valuation of $30 billion for Mobileye, which is 40% lower than its estimates in the last year. Even with a lower valuation, the forward price-to-sales multiple is still steep at 20x. 

The investor appetite for growth stocks has slowed significantly, given the challenging macroeconomic conditions. There is a good chance for Mobileye stock to experience a sell-off in the initial days as a publicly listed company. 

How much did Intel spend on Mobileye?

Intel spent over $15 billion to acquire Mobileye in 2017. 

Is Mobileye going public?

Yes, Mobileye has filed for an IPO as per documents submitted to the SEC.