Mobileye accelerates downhill

Mobileye founder Amnon Shashua
Mobileye founder Amnon Shashua

Despite a 37% fall in the share price since its peak, a secondary offering is likely.

With almost the same speed at which the Mobileye(NYSE: MBLY) share, first listed in July 2014, skyrocketed to an economically illogical bubble value, it has lost 37% of its value, amounting to a $4.8 billion loss in market cap. The Israeli company's market cap is now $8 billion, still high by almost any standard.

Mobileye has developed a system that issues warnings of road perils. The system is based on a mono-camera installed beneath the car's rearview mirror. The system issues a sound warning of potentially dangerous situations, such as moving out of the lane, tailgating, and getting too close to pedestrians and bicycle riders. The product is being sold to equipment manufacturers, who market it to auto manufacturers for integration into the cars they offer to the public at large.

The Mobileye share price, which was $25 in the IPO, quickly soared to $60.28 last October, reflecting a $13 billion market cap. Winter set in, however, and the enthusiasm waned with the temperatures. As of yesterday, the share price was $37.74, down 37% from the peak, at a time when the US capital market is at a record level. The current share price is still 51% higher than in the IPO, however, meaning that anyone who bought it at that time still has reason to smile. Other than a change in the attitude of the average US investor towards Mobileye's future potential, the reason for the fall in the share price is probably the end of the 180-day lock-up period from the IPO, during which parties at interest in the company (including employees with share options) are not allowed to sell their shares. This period expires on January 28, one week from now.

This means that the market fears a large number of shares being put up for sale on the market, which creates pressure on the share price. It is very possible that the market is also anxious that the company plans to create such a supply through a secondary offering, which is a good enough reason for sending more sell orders than buy orders.

Both of the entrepreneurs own 8%

A secondary offering will come as no surprise. The largest shareholder in Mobileye is the Goldman Sachs investment house, one of Wall Street's lions, which is very skillful at buying and selling shares at the right time. Goldman Sachs retains a 12.3% stake in the company, current worth $984 million, while both of the entrepreneurs, chairman and CTO Prof. Amnon Shashua and president and CEO Ziv Aviram, retain 8% each (worth $640 million). Mobileye is actually traded much more according to its potential for producing a driver-less car (Shashua's long-term vision) than for the potential of the warning system currently generating its revenue. Company revenue totaled $34.7 million in the third quarter of 2014, up 70% in annualized terms.

The company finished the first three quarters of 2014 with $104 million in revenue, compared with $49.8 million in the corresponding period in 2013. Mobileye is not yet making a profit according to GAAP standards; it lost $13.1 million, $0.09 per share, in the third quarter of 2014. Its non-GAAP profit was $9.7 million, or $0.04 per share, meaning that the company share is traded at a projected profit multiple of 189 for all of 2014. The Wall Street profit forecast for the fourth quarter of 2014 is $0.05 per share.

Published by Globes [online], Israel business news - www.globes-online.com - on January 21, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Mobileye founder Amnon Shashua
Mobileye founder Amnon Shashua
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