Mobileye Gains 38% in Year’s Best Debut for Big US IPO

(Bloomberg) -- Mobileye Global Inc., the self-driving technology company spun off by Intel Corp. scored the 2022’s biggest trading-debut gain for a major US listing after raising $861 million in an initial public offering priced above its targeted range.

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The first-day gain, which would have been unextraordinary by standards in previous boom eras, comes after one of the few US initial public offerings this year to exceed its goals and as numerous other would-be public companies wait for the market to improve.

Mobileye’s shares opened trading in New York Wednesday at $26.71 apiece after selling for $21 in the IPO. After rising as much as 42% from the offer price, they closed up 38% to $28.97, giving the company a market value of about $23 billion.

The company sold 41 million shares Tuesday after marketing them for $18 to $20, making it only the fourth out of 199 in the US this year to price its IPO above the targeted range, according to data compiled by Bloomberg.

While Mobileye’s market value tops the $15.3 billion Intel paid for Mobileye in 2017, it’s still short of the $30 billion valuation the company had sought earlier, Bloomberg News has reported. In conjunction with the listing General Atlantic agreed to buy $100 million worth of shares in a private placement, according to Mobileye’s filings with the US Securities and Exchange Commission.

Last year’s record-high volumes for IPOs in the US and around the world have tanked amid market volatility, inflation fears and geopolitical risks, as well as a poor showing by companies that went public in 2021, which are down 22% on a weighted average basis.

‘Expansion Opportunity’

“Mobileye’s initial IPO pop validates investors’ interest in Mobileye’s growth prospects in the advanced driver-assistance systems (ADAS) market,” said Mandeep Singh, a senior analyst for Bloomberg Intelligence. “We believe similar to the growth of chips in smartphones, increasing demand for computer vision and ADAS systems in automobiles could be a multiyear expansion opportunity in semiconductors.”

The success of Mobileye’s listing springs from its proven business model and steady growth expectations, Singh said. “Still, it will be hard for companies without profitability to go public in this market,” he said.

IPO volume in the US has plummeted to about $23 billion since Jan. 1, compared with $279 billion at this point in 2021, the data show.

Only two 2022 listings on US exchanges have topped $1 billion. Corebridge Financial Inc. raised $1.68 billion in September, while private equity firm TPG Inc.’s January listing brought in $1.1 billion. Last year, 45 companies raised $1 billion or more in IPOs on the New York Stock Exchange and Nasdaq, the data show.

Awaiting Instacart

Mobileye’s offering is the fourth-largest in the US and might stand as the last major IPO of the year unless a surprise contender pivots quickly toward a listing. Instacart Inc., another highly anticipated listing, decided against an IPO this year after cutting its valuation for the third time, to $13 billion, Bloomberg News reported this month.

Mobileye is off to a strong start in a tough year for its semiconductor peers. The Philadelphia Stock Exchange Semiconductor Index has lost 40% of its value this year. But even within the rout, caused by rapidly declining demand in end markets such as personal computers and smartphones, orders for auto-related chips have held up and shortages persist.

Amnon Shashua co-founded Mobileye in 1999 and and helped take it public in the US in 2014. He has been its chief executive officer since 2017.

In a letter to shareholders included in the prospectus, Shashua said the company’s driver-assistance technology has been used in more than 125 million vehicles. He said he expects the technology to be deployed in 270 million more vehicles by 2030.

“While the core of our business today is making human-driven cars safer, we are working tirelessly to bring about a future of autonomously driven vehicles,” Shashua said.

Mobileye said it will use the cash raised to toward net proceeds for working capital and general corporate purposes, as well as repaying a portion of debt owed to Intel. As of July, it had $774 million of cash and cash equivalents. In the 12 months ended Dec. 25, it had a net loss of $75 million on revenue of $1.39 billion, according to its filings.

Intel Chief Executive Officer Pat Gelsinger is seeking to capitalize on the Israel-based business, which makes chips for cameras and drive-assistance features, and is seen as a prized asset as the car industry races toward fully automated vehicles. But the bright future for self-driving vehicles that was prophesied by Intel, Waymo and others has sputtered. A world full of robo-taxis seems at best decades away and the losses for investors who put faith in the field are mounting.

Intel’s Control

Intel said in its filings that it will continue to hold all of Mobileye’s Class B shares, which will allow it to control the company with 99.4% of the voting power.

Shashua had indicated an interest in purchasing as much as $10 million of shares of Class A common stock, according to the filings. Baillie Gifford and Norges Bank Investment Management, as cornerstone investors, have indicated interest in purchasing up to an aggregate of $330 million shares.

Mobileye’s offering was led by Goldman Sachs Group Inc. and Morgan Stanley. The 23 other underwriters listed in its filings include Evercore Inc., Barclays Plc, Citigroup Inc. and Bank of America Corp.

The company’s shares are trading on Nasdaq under the symbol MBLY, the same ticker it used when it went public the first time in 2014.

(Updates with closing share price in third paragraph.)

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