Key points
- US government acquires 9.9% stake in Intel, converting $11 billion in grants into equity.
- Intel CEO stated the company didn’t need the government funding.
- Intel raises concerns about potential negative impacts on international sales and future grants.
- The government stake could expose Intel to additional regulations and restrictions globally.
Intel announced Monday that the US government’s newly acquired 9.9% stake in the company presents several significant business risks. This follows the government’s decision to convert $11 billion in previously awarded grants into equity, marking another instance of significant government intervention in the corporate sector.
The conversion involves $5.7 billion from the 2022 CHIPS and Science Act and $3.2 billion from the Secure Enclave program. While Intel’s obligations under the CHIPS Act will largely be discharged, the Secure Enclave program remains unaffected.
Intel CEO Lip-Bu Tan publicly stated, in a video released by the Commerce Department, that the company did not require the government funding. Despite this assertion, the company’s official filing highlights potential negative consequences.
These include concerns about the impact on Intel’s substantial international business, representing 76% of its total revenue in 2022, with China alone contributing 29%. The government’s significant ownership could lead to increased scrutiny and potential regulatory hurdles in foreign markets.
Further complicating matters, the filing expresses uncertainty regarding future government grants. Intel raises the possibility of other government entities attempting similar equity conversions, hindering the company’s ability to secure further funding.
The government’s increased influence over laws and regulations could also restrict Intel’s ability to pursue shareholder-beneficial transactions.
The government’s acquisition of Intel shares is at a discounted price of $4 below the market closing price of $24.80 on Friday, resulting in a dilutive effect on existing shareholders’ value. Despite this, Intel shares rose 2% in early Monday trading, reaching $25.25.
The deal follows a meeting between President Trump and Tan, where Trump reportedly demanded Tan’s resignation due to his ties to Chinese firms.
