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What Is Mobileye Global?
Jerusalem, Israel-based Mobileye Global (MBLY) was founded to create a family of imaging related technologies to enable autonomous vehicle operation in a variety of real-world environments via its advanced driver assistance systems, or “ADAS.”
Management is headed by co-founder, president and CEO Amnon Shashua, who has been with the firm since inception in 1999. He is currently Senior Vice President at Intel (INTC) and was founder of CogniTens, a dimensional measurement systems company.
The company’s primary offerings include:
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EyeQ – purpose-built system-on-chip
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RoadExperience Management – autonomous vehicle mapping
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True Redundancy – AV perception technologies
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Next-Gen Radar – Software-defined imaging radar.
Responsibility-Sensitive Safety – Mathematical AV safety model
As of July 2, 2022, Mobileye has booked fair market value investment of $11.2 billion as of July 2, 2022 from parent firm Intel.
Mobileye’s Market & Competition
According to a 2022 market research report by Allied Market Research, the global market for autonomous vehicles was an estimated $76 billion in 2020 and is forecast to reach $2.16 trillion by 2030.
This represents a forecast CAGR of 40.1% from 2021 to 2030.
The main drivers for this expected growth are improved hardware and software technologies as well as data gathering providing innovators with continuously improving systems over time.
Also, growth in connected infrastructure, including Internet of Things and 5G wireless broadband availability, will enhance the industry’s growth prospects.
Major competitive or other industry participants include:
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Argo AI
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Aurora
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Cruise
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Motional
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Pony.ai
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Waymo
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Yandex
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Zoox
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Auto X
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Baidu
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Deeproute.ai
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Didi Chuxing
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Momenta
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WeRide
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Apple
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Sony
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Tesla
Mobileye’s IPO Date & Details
The initial public offering date, or IPO, for Mobileye is expected to be October 25, 2022, and scheduled to be available for investors to trade on the open market starting October 26, 2022.
(Warning: Compared to stocks with more history, IPOs typically have less information for investors to review and analyze. For this reason, investors should use caution when thinking about investing in an IPO, or immediately post-IPO. Also, investors should keep in mind that many IPOs are heavily marketed, past company performance is not a guarantee of future results and potential risks may be understated.)
MBLY intends to sell 41 million shares of Class A common stock at a proposed midpoint price of $19.00 per share for gross proceeds of approximately $779 million, not including the sale of customary underwriter options.
The company also plans to sell an additional $100 million worth of shares in a concurrent private placement to private equity firm General Atlantic at the same price and terms as the public offering.
Baillie Gifford and Norges Bank Investment Management have indicated a non-binding interest to purchase $330 million worth of shares of the offering in the aggregate.
Company founder and CEO Amnon Shashua has indicated a non-binding interest to purchase $10 million worth of shares of the offering.
Class A common stockholders will be entitled to one vote per share and the Class B stockholder, Intel, will have ten votes per share and will control the company post-IPO.
The S&P 500 Index no longer admits firms with multiple classes of stock into its index.
Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO (excluding underwriter options) would approximate $14.1 billion.
The float to outstanding shares ratio (excluding underwriter options) will be approximately 5.15%. A figure under 10% is generally considered a “low float” stock which can be subject to significant price volatility.
Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:
[i] to retain for working capital and general corporate purposes a portion of the net proceeds in such amount as is necessary so that Intel ensures that, immediately after completion of this offering and on a pro forma as adjusted basis after all expenses of this offering have been paid (and after giving effect to any repayment of any indebtedness of Intel and any other transactions contemplated to occur substantially concurrently with this offering), we have $1.0 billion in cash, cash equivalents or marketable securities immediately after the completion of this offering, in accordance with the terms of the Master Transaction Agreement we will enter into with Intel in connection with this offering; and [ii] to use the remainder to repay a portion of the indebtedness owed to Intel under the Dividend Note. On a pro forma as adjusted basis as of July 2, 2022, the portion of net proceeds retained by us would have been approximately $226 million and the portion of net proceeds used to repay a portion of the indebtedness owed to Intel under the Dividend Note would have been approximately $0.6 billion (or $0.7 billion if the underwriters exercise their option to purchase additional shares of our Class A common stock in full).
(Source – SEC)
Management’s presentation of the company roadshow is available here until the IPO is completed.
Regarding outstanding legal proceedings, management believes that any legal proceedings would not have a material adverse effect on its financial condition or operations.
The listed bookrunners of the IPO are Goldman Sachs, Morgan Stanley, Evercore ISI and several other investment banks.
How To Invest In The Company’s Stock: 7 Steps
Investors can either buy shares of the stock in the same way they may buy stocks of other publicly traded companies, or as part of the pre-IPO allocation.
Note: This report is not a recommendation to purchase stock or any other security. For investors who are interested in pursuing a potential investment after the IPO is complete, the following steps for buying stocks will be helpful.
Step 1: Understand The Company’s Financial History
Although there is not much public financial information available about the company, investors can look at the company’s financial history on their form S-1 or F-1 SEC filing (Source).
Step 2: Assess The Company’s Financial Reports
The primary financial statements available for publicly-traded companies include the income statement, balance sheet, and statement of cash flows. These financial statements can help investors learn about a company’s cash capitalization structure, cash flow trends and financial position.
My summary of the firm’s recent financial results is below:
The company’s financials have produced increasing topline revenue, higher gross profit and gross margin, variable operating losses and fluctuating cash flow from operations.
Free cash flow for the twelve months ended July 2, 2022, was $402 million.
Sales and Marketing expenses as a percentage of total revenue have dropped as revenue has increased; its Sales and Marketing efficiency multiple fell to 2.3x in the most recent reporting period.
The firm has paid dividends per the following description:
In connection with the Reorganization, on April 21, 2022, we distributed to Intel the Dividend Note, pursuant to which we have agreed to pay Intel an aggregate of $3.5 billion. We intend to use a portion of the net proceeds that we receive from this offering to repay indebtedness under the Dividend Note. Intel informed us that it intends to contribute to Mobileye Global Inc. any remaining portion of the Dividend Note in excess of such repayment prior to the completion of this offering, so that no amounts under the Dividend Note would remain owed by us to Intel after the completion of this offering and such repayment. […] In connection with the Reorganization, on May 12, 2022, we declared and paid the Dividend in an aggregate amount of $336 million to Intel, net of $14 million of cash paid to tax authorities to settle related tax obligations.
MBLY’s trailing twelve-month CapEx multiple was 3.85x, which indicates it has spent fairly heavily on capital expenditures as a percentage of its operating cash flow.
Step 3: Evaluate The Company’s Potential Compared To Your Investment Horizon
When investors evaluate potential stocks to buy, it’s important to consider their time horizon and risk tolerance before buying shares. For example, a swing-trader may be interested in short-term growth potential, whereas a long-term investor may prioritize strong financials ahead of short-term price movements.
Step 4: Select A Brokerage
Investors who do not already have a trading account will begin with the selection of a brokerage firm. The account types commonly used for trading stocks include a standard brokerage account or a retirement account like an IRA.
Investors who prefer advice for a fee can open a trading account with a full-service broker or an independent investment advisor, and those who want to manage their portfolio for a reduced cost may choose a discount brokerage company.
Step 5: Choose An Investment Size And Strategy
Investors who have decided to buy shares of company stock should consider how many shares to purchase and what investment strategy to adopt for their new position. The investment strategy will guide an investors’ holding period and exit strategy.
Many investors choose to buy and hold stocks for lengthy periods. Examples of basic investing strategies include swing trading, short-term trading or investing over a long-term holding period.
For investors wishing to gain a pre-IPO allocation of shares at the IPO price, they would “indicate interest” with their broker in advance of the IPO. Indicating an interest is not a guarantee that the investor will receive an allocation of pre-IPO shares.
Step 6: Choose An Order Type
Investors have many choices for placing orders to purchase stocks, including market orders, limit orders and stop orders.
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Market order: This is the most common type of order made by retail traders. A market order executes a trade immediately at the best available transaction price.
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Limit order: When an investor places a buy limit order, they specify a maximum price to be paid for the shares.
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Stop order: A buy-stop order is an order to buy at a specified price, known as the stop price, which will be higher than the current market price. In the case of buy-stop, the stop price will be lower than the current market price.
Step 7: Submit The Trade
After investors have funded their account with cash, they may decide an investment size and order type, then submit the trade to place an order. If the trade is a market order, it will be filled immediately at the best available market price.
However, if investors submit a limit order or stop order, the investor may have to wait until the stock reaches their target price or stop-loss price for the trade to be completed.
The Bottom Line
Mobileye is seeking to go public as part of a separation process from its parent firm, Intel.
The market opportunity for autonomous vehicle technologies is large and expected to grow at a high rate of growth over the coming years, so the company enjoys very strong industry dynamics in its favor, although high competition is also a feature of the industry.
Goldman Sachs is the lead underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (31.4%) since their IPO. This is a lower-tier performance for all major underwriters during the period.
The primary risk to the company’s outlook is the significant competitive environment it operates in, with several very large technology companies focused on solving autonomous vehicle technological challenges in novel ways.
Also, MBLY’s topline revenue growth is decelerating, which may be indicative of a slowing growth rate ahead.
As for valuation, management is asking IPO investors to pay an Enterprise Value/Revenue multiple of 9.2x on revenue growth of 21.3%.
The company is generating an annual run rate of $72 million in operating losses, a negative in the current stock market environment that has punished money-losing firms due to a rising cost of capital environment.
However, optimistic investors, who include various private equity firms and the firm’s founder, believe that the IPO is an investment opportunity, although there are plenty of firms who have sold additional shares to institutional investors but have performed poorly post-IPO.
Given the volatility in markets recently, the difficulty in determining a comparable value for the firm’s technologies and its substantial operating losses on decelerating revenue growth, I’m on Hold for the Mobileye IPO.
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