Will Intel's Spin-Off of Mobileye Lead IPO Market Out of the Doldrums?

After the markets closed last Friday, Mobileye Global filed a Form S-1 with the U.S. Securities and Exchange Commission announcing its initial public offering, separating the advanced driver assistance systems (ADAS) technology company from parent Intel Corp. (NASDAQ: INTC). Intel paid $15.3 billion for Mobileye five years ago and is filing to sell an unspecified number of Class A shares at an as-yet unspecified price in an IPO at an unspecified date.

The good news is that the Mobileye IPO is expected to liven up what has been a comatose IPO market so far in 2022. According to IPO ETF manager Renaissance Capital, there have been a total of 64 U.S. IPOs, including SPAC mergers, in the first three quarters of this year. The largest was the September spinoff of AIG’s Corebridge Financial, raising $1.68 billion in the sale of 80 million shares at $21 per share, the low end of the target price range.

Proceeds from the 64 IPOs concluded to date in 2022 total $6.5 billion, compared to 2021’s total proceeds of $142.4 billion from 397 IPOs.

IPOs picked up in the third quarter, according to Renaissance Capital, rising to 25 from a meager 18 in the first quarter and a paltry 21 in the second. The Corebridge IPO accounted for 71% of the third-quarters proceeds. Just three IPOs in the third quarter raised more than $100 million each.

The other big year-over-year change was the virtual disappearance of special purpose acquisition companies (SPACs), or blank-check companies. As of late last month, 21 SPACs worth $9.9 billion have liquidated. A potential liquidation of Digital World, the SPAC that agreed last year to take former President Donald Trump’s media company public, is also in play. The blank-check company already has received redemption notices from some investors.

When Intel announced in December its intention to spin off Mobileye, the ADAS technology maker was expected to be valued somewhere north of $50 billion. That figure has been whittled down to around $30 billion thanks to the lousy IPO market, rising inflation and higher interest rates. Intel will retain all of Mobileye’s Class B shares, which have 10 times the voting power as the Class A shares.

Just last week, Germany’s Volkswagen spun off its Porsche business in an IPO that added $9.2 billion to VW’s balance sheet. Mobileye is not expected to raise anywhere near that amount, but $1 billion is seen as a floor. The ceiling may be as high as $2.5 billion.

As for what other big IPOs could follow, there’s Softbank’s planned spin-off of chip designer Arm and another chipmaker, Ampere Computing. Softbank was seeking a valuation for Arm of around $60 billion back in March, while Ampere’s valuation in April was around $2.4 billion. What either is worth now is what investors will be willing to pay. Healthy proceeds from Mobileye’s IPO could be just the shove these potential offerings need.

Intel shares added about 4.7% on Monday to close at $26.97 and traded up another 2.3% in Tuesday’s premarket session. The battered stock’s 52-week range is $25.74 to $56.28. The low was posted last Friday. Intel stock is down about 48% over the past 12 months and down 46% for the year to date.

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