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The Mobileye market debut comes as parent company Intel looks to embark on a capital-intensive process to enhance its market position.
Shares of self-driving car technology company Mobileye (NASDAQ: MBLY) climbed more than 37% on its market debut on Wednesday. This development comes after the Jerusalem-based firm was spun out of semiconductor chip manufacturer Intel (NASDAQ: INTC).
In 2017, Intel bought the Israeli company for $15.3 billion to use its IPO proceeds to establish more chip factories. However, Mobileye’s IPO valuation of around $17 billion turned out far below the semiconductor giant’s expectations. Nonetheless, Mobileye’s IPO $21 price rose to $27.85 on Wednesday on news of its first day of public trading after Intel sold.
Mobileye’s current market cap is also far below Intel’s earlier expectations, which suggests that tech investors have cooled on IPOs. This could be because of macroeconomic parameters such as rising interest rates and a slowing economy. A Wall Street Journal article from October 17th describes Intel as “eyeing a significantly lower valuation [in Mobileye IPO] than previously expected.”
WSJ also referred to information from familiar sources. According to the article, Mobileye lowered its roughly $50 billion valuation to $20 billion and was also looking to sell a smaller number of shares than initially intended. The company hoped fewer shares at a lower price would create enough interest to pump prices after trading starts.
Mobileye Market Debut Symbolizes Fresh Start
Mobileye is offering investors an opportunity in a fresh area of growth. However, Intel will retain control of Mobileye and hold over 750 million shares of its Class B stock. This class of stock reportedly has 10 times the voting power of Class A stock. Furthermore, Mobileye said in an October 18th filing that it is targeting between $18 and $20 per share.
The development surrounding Mobileye’s IPO and listing on the Nasdaq plays into Intel’s strategy to transform its core semiconductor business. It has lagged behind chief rivals such as AMD (NASDAQ: AMD) and Nvidia (NASDAQ: NVDA) in recent years. Intel’s strategy to strengthen its market position involves becoming a foundry for other chipmakers. This is why the California-based company is looking to build more manufacturing plants. However, this goal is very capital intensive.
Intel shares were trading down slightly on Wednesday amid news of the Mobileye IPO development. In all, shares of the semiconductor mainstay are trading 47% lower in value since the turn of the year. By comparison, the tech-heavy Nasdaq Composite is trading 29% lower.
Mobileye was founded in 1999 and has partnerships with several notable automobile brands such as Audi, BMW, Volkswagen, GM, and Ford. The Israeli company helps to develop advanced driving and safety features, including driver assist and lane-keeping, using various resources. These features include the company’s “EyeQ” camera, chips, as well as software. According to CEO Amnon Shashua, at least 50 companies are already using the company’s technology on 800 different vehicle models.