The Mobileye IPO made its stock market debut on October 26 as Intel offered Class A stock to investors. The company which makes self-driving technology for cars was earlier valued at nearly $50 billion but volatile markets forced the company to re-evaluate twice. Mobileye stocks rose nearly 37% above IPO price on Wednesday but it remains to be seen whether it can maintain the momentum.
Experts predict that the Mobileye IPO debuted long past its prime and as competition heats up, Intel will be forced to make some tough calls. On October 27, Intel released its quarterly earnings that confirmed suspicions that the tech company had fallen on hard times.
The Mobileye IPO Performance
Bad timing. Unstable Markets. Fierce competition. These are the three things that have put a dampener on the Mobileye IPO. The company seemed full of potential when it was bought by then Intel CEO Brian Krzanich. But in the five years since, the landscape has changed considerably and Mobileye stock has failed to meet expectations.
The public offering managed to raise $861 million for Intel, which has retained its control by holding on to Class B stock. As inflation slows the economy, tech investors have readjusted their expectations, preferring to be cautious over enthusiastic.
Overall Intel shares have been down around 47% this year, while Nasdaq is down by nearly 30%.
Why should you avoid Mobileye stock?
Investors have shifted their attention away from the Mobileye IPO as its peers have moved ahead in the race. CEO Pat Gelsinger said that the company is working on a comeback plan but only time will tell how it will go.
Adverse Markets
It has been a brutal year for tech stocks as inflation, supply chain issues, and geopolitical issues cast a dark cloud over the future.
Intel is reportedly planning massive layoffs as the demand for personal computers have hit all-time lows. The IPO of Mobileye has failed to meet Intel’s expectations and the company has retained ownership of Class B stock that has 10 times the voting rights of Class A stock.
Experts point out that auto industry stocks have usually traded at or near low valuation multiples. For a tech company like Mobileye, customers include car companies, some of whom have started developing driver-assist technologies on their own.
Wrong Timing
In December, when Gelsinger revealed his plans to take Intel’s Mobileye public, he stated that things would not change much. He stated that Mobileye is operated differently in comparison to Intel. At the time, chip shortages were threatening to derail operations of tech companies. If the public offering was made when the market was looking for new players, Intel might have found itself inundated with orders and investments.
The year 2022 has been the worst year for public offerings as investors have moved away from risky ventures and directed their attention towards safer, more profitable bets. The dismal performance of companies that went public in 2021 have also exacerbated matters.
Misdirected Investment
Intel’s Mobileye missed the timing and investor appetite has sunk to new lows as inflation eats into budgets. Investors are also wary of the fact that funds raised by the Mobileye IPO will be redirected towards paying off Intel’s debts. Usually, investors prefer to see their funds invested for development of the company they have a stake in.
Intel had also hoped that giving the public a stake in its driving-tech concern will have a positive effect on its shares. However, even after the IPO, Intel’s shares have traded lower.
Meanwhile, the company continues to remain optimistic about its future prospects. Mobileye CEO Amnon Shashua has mentioned that in the next eight years its driver assist technology will grow 116% by 2030 from 125 million vehicles to 270 million.
