SoftBank to buy $2 billion in Intel shares at $23 each — firm still owns majority share of Arm

News
By published

Good time for investment?

Intel's headquarters in Santa Clara, Calif.
(Image credit: Intel)

SoftBank Group late on Monday announced a plan to purchase $2 billion worth of Intel shares at $23 each, which will provide the troubled chipmaker much-needed cash. The companies inked a definitive securities purchase agreement, which sets the price of Intel stock (currently trading below its book value) at which the Japanese company will buy it. Softbank also still owns a majority share of Arm.

Intel and SoftBank frame the deal as a way to 'deepen their commitment to investing in advanced technology and semiconductor innovation in the United States.' Given the context of Intel's recent struggles, this $2 billion share purchase is a way to pour some money into Intel's efforts to rebuild itself as a leading supplier of processors and a contract chipmaker that serves both internal and external needs for leading-edge semiconductor production. 

By modern foundry standards, $2 billion is not a large sum of money. Building a single leading-edge semiconductor production facility today typically costs between $20 billion and $30 billion, and in many cases even more, depending on planned production volumes, product mix, and equipment used. However, the investment does not seem to be entirely about money, even though $2 billion will be instrumental for Intel, which bleeds billions every quarter. 

"Semiconductors are the foundation of every industry. For more than 50 years, Intel has been a trusted leader in innovation," Masayoshi Son, Chairman & CEO of SoftBank Group. "This strategic investment reflects our belief that advanced semiconductor manufacturing and supply will further expand in the United States, with Intel playing a critical role." 

Additionally, SoftBank may consider an investment in Intel, as it represents undervalued infrastructure that could drive significant advancements in the high-tech sector and substantially increase its value. At $23 per share, Intel is trading below its book value with a market capitalization of around $103 billion. By contrast, the company's real estate and manufacturing assets cost $109 billion. So for SoftBank, this is both a financial opportunity (buying undervalued assets) and a strategic move (securing a stake in the perfectly set semiconductor production infrastructure needed to produce chips that support AI in one way or another). 

"We are very pleased to deepen our relationship with SoftBank, a company that is at the forefront of so many areas of emerging technology and innovation and shares our commitment to advancing U.S. technology and manufacturing leadership," said Lip-Bu Tan, CEO of Intel. "Masa and I have worked closely together for decades, and I appreciate the confidence he has placed in Intel with this investment."

TOPICS
Anton Shilov
Anton Shilov
Contributing Writer

Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

48 Comments Comment from the forums
  • JRStern
    $2b just ain't what it used to be.
    Reply
  • cyrusfox
    JRStern said:
    $2b just ain't what it used to be.
    no not when the latest High NA scanners are what, ~400 million a piece.
    Reply
  • bit_user
    JRStern said:
    $2b just ain't what it used to be.
    That still pays a lot of salaries, though. There are plenty of fixed costs associated with their business plans, which means one of the few places they've been able to find some savings is in workforce reductions. If a decent chunk of that investment can avoid further layoffs, then its value to the company is quite high.

    I guess obvious downside should be diluting existing shareholders. However, if they're medium/long-term oriented, they should recognize the importance of this cash infusion to Intel's survival and not resist the move.
    Reply
  • call101010
    Softbank started as Japanese PC Magazine company (OH PC! ), and ended up owning half the tech companies in the world

    Their first Issue

    https://upload.wikimedia.org/wikipedia/commons/thumb/f/f2/First_Issue_of_Oh%21PC.jpg/1076px-First_Issue_of_Oh%21PC.jpg?20221022122747
    Reply
  • dalek1234
    It's not explicitly stated, but sounds like Intel has issued new shares for this deal. This means that they have diluted the overall share value value of all the market-cap shares, despite the share price going up on the news. So when this $2 billion fails to have an impact on Intel's performance, Intel shares will be worth less than if they didn't dilute them.

    So basically the investors get screwed unless this $2 billion has an impact, which is extremely doubtful given the current state of Intel. Even if Intel get another $10 billion from US gov, it still won't do much given that Intel can bleed that much in a quarter.
    Reply
  • -Fran-
    What matters here is the intention behind SoftBank approaching Intel with this:
    1- Are they looking to just keep this as a "passive income" style investment?
    2- Are they looking to influence Intel's direction?

    I'd love it if it's #2 in full, because we could see the day where they just license X86 and/or make designs using other ISAs out there. They get the foot on the door and start talking to the board face to face.

    Regards.
    Reply
  • TerryLaze
    bit_user said:
    That still pays a lot of salaries, though. There are plenty of fixed costs associated with their business plans, which means one of the few places they've been able to find some savings is in workforce reductions. If a decent chunk of that investment can avoid further layoffs, then its value to the company is quite high.

    I guess obvious downside should be diluting existing shareholders. However, if they're medium/long-term oriented, they should recognize the importance of this cash infusion to Intel's survival and not resist the move.
    These are intels current financials.....they are not hurting for money.
    https://i.imgur.com/0ZmwBTp.jpeg
    dalek1234 said:
    It's not explicitly stated, but sounds like Intel has issued new shares for this deal. This means that they have diluted the overall share value value of all the market-cap shares, despite the share price going up on the news. So when this $2 billion fails to have an impact on Intel's performance, Intel shares will be worth less than if they didn't dilute them.

    So basically the investors get screwed unless this $2 billion has an impact, which is extremely doubtful given the current state of Intel. Even if Intel get another $10 billion from US gov, it still won't do much given that Intel can bleed that much in a quarter.
    a 2 bil on 103 bil dilution would be less than 2% ..................
    And it's not how these things work anyway, but even it it were, 2% wouldn't hurt anybody.
    -Fran- said:
    What matters here is the intention behind SoftBank approaching Intel with this:
    1- Are they looking to just keep this as a "passive income" style investment?
    2- Are they looking to influence Intel's direction?

    I'd love it if it's #2 in full, because we could see the day where they just license X86 and/or make designs using other ISAs out there. They get the foot on the door and start talking to the board face to face.

    Regards.
    As above, 2% isn't buying anybody anything, a 2% say is not a say at all, softbank is investing in stocks that have a huge change of inflating manifold in a short time. They could also bomb completely, but that's why the stock market is also called gambling.
    Reply
  • Marlin1975
    ^
    I think that kinda proves his question more. 2% by itself is not much as you said, and I agree. But they are paying $23 when the stock has been under $20 many times this year. So paying $23 means they must be getting more than just the stock. If not then they could pay less on the open market for the same number of shares.
    Reply
  • cyrusfox
    Marlin1975 said:
    ^
    I think that kinda proves his question more. 2% by itself is not much as you said, and I agree. But they are paying $23 when the stock has been under $20 many times this year. So paying $23 means they must be getting more than just the stock. If not then they could pay less on the open market for the same number of shares.
    One could not buy $2billion worth of stock without forcing it to squeeze upward way past $23. Average volume is 90 million shares, $2billion essentially an extra full day of volume, that spike would not go unnoticed. and would promote further buying have it go even higher.

    On the news alone of this purchase the stock has once again jumped, it is now trading at $25.50 territory this morning. They got a deal by negotiating a fair price first.
    Reply
  • Marlin1975
    cyrusfox said:
    One could not buy $2billion worth of stock without forcing it to squeeze upward way past $23. Average volume is 90 million shares, $2billion essentially an extra full day of volume, that spike would not go unnoticed. and would promote further buying have it go even higher.

    On the news alone of this purchase the stock has once again jumped, it is now trading at $25.50 territory this morning. They got a deal by negotiating a fair price first.

    You do not buy in a single day. As I said the stock has been below $20 very often and below $23 on average for the past 6 months.
    The stock is up due to them buying, not because anything internally has changed at intel. Once this news cycle settles, unless there is something concrete of positive nature coming out soon, it will drop again.
    Reply