Even Mobileye must bow to market conditions

Mobileye CEO Amnon Shashua Photo: Heinz Troll European Patent Office
Mobileye CEO Amnon Shashua Photo: Heinz Troll European Patent Office

Amnon Shashua, Israel's most daring entrepreneur, would have struggled to get a valuation of $30 billion, let alone $50 billion, and might have harmed the Mobileye brand.

Mobileye and its entrepreneur Prof. Amnon Shashua have from the outset been characterized by enterprising and daring thinking without compromising on its vision, its way forward and demands. The concept of developing car sensors that warn in real time about dangers on the road, founding a large tech company in Jerusalem of all cities, private financing rounds at exorbitant values in its formative years, a successful Nasdaq IPO, and of course the acquisition by Intel for $15.3 billion in 2017 - still the biggest exit by any Israel company. This daring even allowed Shashua to insist on for himself a status at Intel that no previous entrepreneur has ever demanded: a kind of managerial and structural autonomy, a separate entity within the US chip giant, which leads its sector and has become a type of separate profit center, with results seen by everyone.

In Israel Shashua has developed a special status. He conducted the $1 billion acquisition of Moovit and Mobileye took in employees from divisions that were closed down and merged as part of Intel's organizational restructuring under incoming CEO Pat Gelsinger. Major announcements bout Intel in the vehicle sector tend to be made by Gelsinger and Shashua together, as happened last September when a production line was launched for car chips in Ireland and when Moovit's robo-taxi was unveiled, with promises that it would be on the streets of Germany this year.

For some time Shashua has been building up towards Mobileye's IPO on Nasdaq. Back in September in the joint announcement with Gelsinger, Shashua said that he was interested in taking Mobileye public again. He did not mention the sought after valuation, although it is clearly important that that offering is completed well above the $15.3 billion for which it was acquired by Intel. In December 2021, when the window for IPOs was already closing, Mobileye was looking to get an IPO going at a company valuation of $50 billion, come what may.

An incentive for employees

Beyond the price tag and personal honor, the big importance of an IPO by a company like Mobileye is mainly for the employees. They currently hold Intel stock, which has been falling for several years and is currently being traded at a multi-year low of $38 per share. For the sake of comparison, the share price of rival Nvidia, despite the big declines of tech company shares since November, has been doing much better than Intel over the years. Over the past five years Nvidia's share price has risen 284% while Intel's has risen by just 10%.

In Israel's tech industry, with chip developers in high demand from the tech giants like Amazon, Apple, and Nvidia, the shares portfolio of Mobileye, a company which has achieved especially high growth until recently in the field of innovation like smart transport, could become an incentive that would persuade candidates to work at Shashua's company.

However, a number of changes began last year that might throw cold water on Mobileye's dream. The ongoing falls on Wall Street have significantly lowered the multiples that a company like Mobileye can receive directly from the public in an offering. Publicly trade rivals like Japanese company Aisin, Dutch company Freescale-NXP, Swedish company Autoliv and Germany company Continental are all traded on world stock markets at much lower multiples, single-digit, on their revenue.

Not what it once was

Mobileye, which had revenue of $1.4 billion last year, would find it difficult on current multiples to receive a valuation of even $30 billion, let alone $50 billion.

Mobileye's growth is no longer what it was in the past. Growth in the first quarter of 2022 was 5% over the preceding quarter, compared with growth of 43% between 2020 and 2021. Despite the high forecasts for the car industry in the coming years, it is still suffering from the damage wreaked by Covid, with productions lines not yet back to full manufacturing, after coming to a complete standstill and there is a serious shortage of chips in the supply chain. Inflation and the jump in oil prices are causing many to consider alternatives to the car and are expected to result in a slowdown in new car deliveries, at least in the coming years.

As "globes" has revealed, Shashua has announced in a letter to employees that the IPO will wait until the market stabilizes. Mobileye is operating in a promising field, and the entrepreneur pushing it forward is one of the most daring on the market. But it is just as well that Shashua has postponed the offering and avoided a situation that might have for the first time harmed a brand that until now has worked flawlessly.

Published by Globes, Israel business news - en.globes.co.il - on July 11, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

Mobileye CEO Amnon Shashua Photo: Heinz Troll European Patent Office
Mobileye CEO Amnon Shashua Photo: Heinz Troll European Patent Office
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