Although the primary market on Wall Street has slowed almost to a halt, autotech company Mobileye is reviving its plans for a huge IPO on Nasdaq, and at the end of last week it filed a prospectus. At this stage, the prospectus does not state the valuation at which Mobileye seeks to make the offering, but a few weeks ago Bloomberg reported that the valuation of $50 billion that the company was aiming at earlier in the year had been trimmed to $30 billion.
If the company does succeed in an offering despite the difficult market conditions, which is by no means certain, it could become the biggest IPO of the year in New York. In Germany last week, car maker Porsche raised €8.2 billion in an offering at a valuation of €72 billion.
Mobileye develops ADAS (advanced driver assistance systems), and technological solutions for autonomous vehicles. The company was founded in 1999 by Prof. Amnon Shashua, who serves as its CEO, and Ziv Aviram. In 2014, Mobileye was floated on the New York Stock Exchange at a valuation of $5.3 billion, and in March 2017, when its market cap stood at $10.5 billion, it was acquired by Intel for $15 billion. For its second round on Wall Street, Mobileye is being accompanied by no fewer than 24 investment banks, headed by Goldman Sachs and Morgan Stanley.
Mobile has not yet announced how much money it seeks to raise in the offering, but a substantial part of the proceeds will go to Intel, which seeks to raise funds for its other activities; in short, Intel wants cash.
Intel will not offer Mobileye shares for sale, but according to the prospectus Mobileye has undertaken to pay it a sort of dividend (Mobileye is a loss-making company with no accumulated profits) of $3.5 billion out of the proceeds of the offering. Last May, Mobileye paid Intel $336 million; that sum too was described as a dividend.
In practice, the $3.5 billion is a liability that Mobileye owes Intel and that bears interest at an annual rate of 1.26% (incurring an expense of $9 million for Mobileye in the first half of 2022). On its reporting date of July 2, Mobileye had cash and cash equivalents of $774 million.
After the expected payment to Intel, Mobileye’s shareholders (who will include external investors after the flotation) are not expected to benefit from dividends, and the company emphasizes that it intends to retain future profits and not to distribute dividends in the foreseeable future.
$67 million first half loss
The prospectus shows that in the first half year, ending on July 2, Mobileye’s revenue grew by 21.3% in comparison with the first half of 2021, reaching $854 million. On a GAAP basis, the company’s gross profit margin fell from 49% of revenue to 47%. On a non-GAAP basis, excluding various accounting items, the drop was from 78% to 76%.
Because of growth in R&D expenses , operating expenses rose by 29.3% to $441 million, and so from an operating profit of $7 million in the first half of 2021, Mobileye switched to an operating loss of $36 million in the first half of 2022.
On the bottom line, Mobileye posted a net loss of $67 million for the first half of 2022, which compares with a net profit of $4 million in the corresponding period of 2021. Excluding write downs of intangible assets and stock-based compensation to employees, Mobileye posted an adjusted net profit of $276 million in the first half of 2022, up 2% from the corresponding period.
Narrower annual loss
Stock-based compensation to employees amounted to $76 million, which compares with $49 million in the corresponding period and $97 million in 2021 as a whole. Mobileye states in the prospectus that it currently employs 3,100 people, 200 more than in 2021, and representing growth of over 1,000 in less than three years.
Mobileye’s revenue in 2021 totaled nearly $1.4 billion, 43.3% more than in 2021, and it posted a net loss for the year of $75 million, after a loss of $196 million in 2020. As in the half-year results, write-downs of intangible assets weighed on Mobileye’s bottom line.
Excluding these write-downs and stock-based compensation, Mobileye made an adjusted net profit of $474 million in 2021, up from $289 million in 2020. The write-downs stem from Intel’s acquisition of Mobileye, and the subsequent acquisition of Moovit, which is now part of Mobileye, and they are expected to continue in the near future.
The prospectus also shows that China is Mobileye’s second largest market after the US. In 2021, revenue from products shipped to China was $270 million. For the US, the figure was $363 million, and for Germany $263 million. Mobileye’s largest customers are German-US vehicle parts manufacturer ZF, French automotive supper Valeo, and Irish-American automotive technology supplier Aptiv. ZF accounted for 43% of revenue in the first half of 2022, while Valeo and Aptiv accounted for 15% each.
China also appears among the risk factors listed in the prospectus, against the background of the restrictions imposed by the US on technology exports to China. Additional future restrictions, the prospectus states, could adversely affect Mobileye’s business if Chinese customers choose to buy local technology instead.
Among other risks listed by Mobileye are competition in its market, the shortage of microchips, its dependence on STMicroelectronics as a component manufacturer, its dependence on a small number of large customers, supply chain difficulties, and raw materials costs.
Shashua: I don’t intend to leave
Another risk mentioned is the company’s dependence on its co-founder and CEO Amnon Shashua. "While Professor Shashua is highly active in our management and allocates a significant amount of time to our company, he does not devote his full time and attention to our company. For example, Professor Shashua is also the Chairman and co-founder of AI21 Labs, which works to use AI to understand and create natural language, the Co-Chairman and co-founder of OrCam, which harnesses computer vision and AI to assist the visually and hearing impaired, the Founder of One Zero Digital Bank, an entirely digital independent bank being developed in Israel, the Chairman and co-founder of Mentee Robotics, which aims to build humanoid robots, and the Sachs Chair in Computer Science at the Hebrew University of Jerusalem, where he teaches and supervises graduate students," the prospectus states.
In a letter to potential investors appended to the prospectus, Shashua points out that, unlike many founders who leave when their companies are sold, he did not leave, and promises that he has no intention of leaving his life’s work. "Mobileye’s goals - my goals - have still not been completed, and I am as committed as ever to a safer future," Shashua writes.
Shashua’s importance to Mobileye finds expression in his compensation: in 2021, his basic salary was $263,000, 33% more than in 2020. Altogether, Shashua’s compensation amounted to $332,000 last year.
Once the flotation is completed, Shashua will be entitled to a further rise in pay. His annual salary will more than triple to $800,000, and he will receive annual stock-based compensation worth $14.2 million, the terms of which will be determined later.
The highest paid person at Mobileye in 2021 was chief technology officer Prof. Shai Shalev-Shwartz, with a salary of $761,175 and a total compensation cost of $3.9 million. In 2022, he received an allocation of some 13 million restricted shares.
Published by Globes, Israel business news - en.globes.co.il - on October 3, 2022.
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