Mobileye IPO: What You Need To Know
Tesla Inc (TSLA), the Texas-based electric vehicle (EV) behemoth, has become the most valuable car company in the world despite the fact that it sells only a fraction of the number of vehicles sold by its major competitors, Toyota and General Motors.
EV startup Rivian was arguably the hottest initial public offering (IPO) of 2021, opening with a valuation of more than $100 million, yet it’s not sold a single vehicle.
Microchip manufacturer Nvidia Corp (NVDA) has risen by more than 70% over the past year, driven higher on the strength of its autonomous vehicle technology.
We don’t have to tell you that the EV market is on fire, but ravenous investor appetite helps explain why Intel Corporation (INTC) is choosing this moment to IPO its Israeli autonomous vehicle subsidiary, Mobileye. The firm has been a leading innovator in hardware and software for self-driving vehicles for more than two decades, and today Mobileye technology is used in more than 100 million cars worldwide.
Mobileye has filed with the Securities and Exchange Commission (SEC) to go public. Founded in Jerusalem in 1999, Mobileye currently has a valuation of nearly $50 billion, according to reports. That’s more than three times the $15 billion Intel paid for the company five years ago.
Even after the market meltdown over the first two months of 2022, which hit the EV industry particularly hard, investors are still eager to buy stocks that will profit from EV and autonomous vehicles. But while there’s little question autonomous driving and EV represent the future of automobiles—at least as far as governments and venture capitalists are concerned—consumers have so far remained hesitant.
The Case for the Mobileye IPO
Buying the Mobileye IPO would be a bet that autonomous vehicles will become the norm on the highway to the future. For investors, this future could be arriving as early as 2022.
Mobileye delivered more than 28 million of its EyeQ computer vision processor chips in 2021 compared to only 2.7 chips in 2014. Research company Morningstar estimates that Mobileye’s 2021 revenue hit $1.4 billion, compared to less than $500 million four years previously.
“We believe Intel-Mobileye is well suited to capitalize on the autonomous driving opportunity, given its strategy for scalability and real-time map development,” noted Morningstar analyst Abhinav Davuluri.
Take a (virtual) ride in an autonomous vehicle that uses Mobileye’s technology, and you can get a look at the future, too. The video at the link above shows how Mobileye’s sensors helped a passenger car merge onto a busy highway, navigate around parked cars and yield to people walking on the street.
The performance wasn’t completely flawless, and the automated drive is a bit more herky-jerky than what you might expect from an experienced driver, but meandering around a busy street in Jerusalem using high-tech cameras, radar and lidar is impressive nonetheless.
In February, press reports said that Mobileye was teaming up with Benteler EV Systems and Beep to launch a network of driverless EV shuttles in Israel and Germany by the end of this year. The company reportedly aiming to launch driverless vehicles in the U.S. in 2023.
The Case Against the MobilEye IPO
A few years ago, Kevin George Aziz Riad was arrested when his car collided into another vehicle, resulting in the deaths of two people. He was charged with two counts of vehicular manslaughter with gross negligence, and he faces a civil suit by the family of one of the victims that claims Riad was moving at an “excessively high rate of speed.”
What makes the case interesting is that Riad was in a 2016 Tesla Model S, and he wasn’t exactly driving—instead, he had engaged Tesla’s semi-autonomous Autopilot feature. It enables a Tesla EV to steer, accelerate and brake within its lane, without driver input. Tesla notes that use of the feature requires active driver supervision, and the company warns it does not make the vehicle autonomous.
This appears to be the first case of a person being charged with a felony in the U.S. for a fatal crash involving a motorist who was using an automated driving system—but it’s not the last. Authorities in Arizona filed a charge of negligent homicide in 2020 against a driver Uber had hired to help trial its self-driving car on public roads.
These cases raise an obvious concern about autonomous vehicles: What happens when they make mistakes? It’s not an idle question. While autonomous vehicles represent huge growth potential—the main reason why Tesla’s stock has vroomed ahead of the market so quickly—there are potentially huge logistical and technological hurdles that need to be addressed before the dream becomes a reality.
Then there’s the market position of highly speculative tech startups that fall squarely into the growth stock category. With interest rates on the rise and investors seemingly turning away from fast-growing tech companies that may suffer when it becomes more expensive to borrow money, potential IPO investors need to ask themselves how rocky they believe Mobileye’s road will be this year once it’s set off on its own.
Should You Invest in the Mobileye IPO?
Should the world amend itself to a more autonomous future, Mobileye would seem to have a leg up.
“Ingrained in Mobileye’s strategy is developing scalable solutions, with its future EyeQ processors poised to incrementally approach [fully autonomous driving], with Intel’s help,” noted Davuluri.
Investors are bullish on companies that can take advantage of that new world. Tesla, for instance, has yielded an annual return of more than 150% over the past three years.
Then there’s the wild popularity of environment, social, governance (ESG) investing, which should greatly benefit companies like Mobileye. ESG factors in a company’s environment, social and governance record, with the goal of identifying companies that will deliver both solid investment gains and positive outcomes for society.
Mobileye’s parent Intel will reportedly remain a majority shareholder once the autonomous driving company goes public. And Intel currently has a strong ESG risk profile, according to rating firm Sustainalytics (so does Nvidia). It stands to reason that Mobileye would score well on ESG metrics, too.
That’s a boon because investment dollars are searching for viable companies with solid ESG marks; U.S. ESG funds saw almost $16 billion in inflows last year.
Given Mobileye’s established technology, backing by Intel and potentially strong ESG profile, investors looking to ride the autonomous vehicle wave might do well to consider the company with whatever small portion of their portion of their portfolio that’s set aside for individual stock picking.
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