The share price of advanced driving assistance systems (ADAS) company Mobileye Global Inc. (Nasdaq: MBLY) is up 8% in premarket trading after Intel Corp. (Nasdaq: INTC) made it clear that it has no plans to divest its majority stake in the Israeli company.
Intel said, "As the majority shareholder in Mobileye, Intel has an unwavering focus on value creation and is excited about the future of its business. We currently do not have any plans to divest a majority interest in the company. By providing Mobileye with separation and autonomy, we have enhanced its ability to capitalize on growth opportunities and accelerate its path to creating even greater value. We believe in the future of autonomous driving technology and in Mobileye’s unique role as a leader in the development and deployment of advanced driver assistance systems."
In recent weeks there have been reports ahead of a critical Intel board of directors meeting about cuts that the chipmaker plans realizing its holdings in subsidiaries like Mobileye and Altera. One report just over a week ago led to a strong fall in Mobileye's share price, which is down 15% since the start of the month.
Since the start of 2024, Mobileye's share price is down 72% and it is currently traded at a market cap of $9.4 billion, before the premarket rise. Mobileye held its IPO nearly two years ago at a company valuation of $17 billion.
Intel currently holds an 88% stake in Mobileye and the sale of shares in the company, or even control of it, was considered as a quick way of injecting cash to reduce its latest cuts and allow investment of the billions needed to set up new manufacturing plants.
Intel has announced that it is laying off 15% of its workforce but at the same time the chipmaker needs to complete construction of at least three new plants in the US and Israel in order to implement its production strategy to compete with rivals.
Last month Intel announced that it was cutting $10 billion in spending and early this week it said that it is spinning off its production division in order to attract external investors.
Since Intel has sold only 12% of Mobileye's shares since the IPO at the end of 2022, Mobileye's shares have been considered in demand and increased their price. But after Mobileye cut its forecasts in recent quarters, there has been a steep drop in the share price.
Intel may perceive that Mobileye's stock has a potential upside, or in today's clarification it may also have been required to prevent the continuation of the decline caused by speculation and reports in the US financial media that it was considering selling its Mobileye stake.
Published by Globes, Israel business news - en.globes.co.il - on September 19, 2024.
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