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Intel Cautions on US Government's 9.9% Equity Stake

  • tech360.tv
  • 1 day ago
  • 2 min read

Intel warned on Monday that the US government's 9.9% equity stake could pose risks to its business. The chipmaker stated in a securities filing that potential harm to international sales and limited access to future government grants were among its concerns.


Illuminated cube with "Intel" logo on wet pavement, surrounded by trees under a cloudy, blue sky; calm, reflective ambiance.
Credit: INTEL

This follows the government's decision to convert USD 11 billion in grants into an equity stake in Intel. The move marks the latest government intervention in corporate America by President Donald Trump.


Intel Chief Executive Officer Lip-Bu Tan stated in a video posted by the Commerce Department on Monday that the company did not require the government funding. "I don't need the grant," Tan said, "But I really look forward to having the U.S. government be my shareholder."


However, Intel's filing raised questions regarding the US investment. The company noted uncertainty about whether other government entities might seek to convert existing grants into equity or be unwilling to support future grants.


The US government will acquire Intel shares using USD 5.7 billion in unpaid grants from the 2022 CHIPS and Science semiconductor subsidy law. An additional USD 3.2 billion from the Secure Enclave program, awarded last year under President Joe Biden, will also contribute to the acquisition.


Intel's obligations under the CHIPS Act, excluding the Secure Enclave program, will be considered discharged "to the maximum extent permissible under applicable law," according to the filing.


The filing also suggested that Intel's non-US business could be affected by the US government's significant shareholder status. This could subject the company to additional regulations or restrictions, such as foreign subsidy laws in other countries.


Sales outside the United States accounted for 76% of Intel's revenue last year, with revenue from China contributing 29% to its total revenue.


The shares to be issued to the US government will be at a discount to the current market price, which is dilutive to existing stockholders. The government is purchasing Intel shares at a USD 4 discount to Friday's closing stock price of USD 24.80.


Intel shares rose 2% in early trading on Monday to USD 25.25. The filing stated that the government's substantial additional powers over laws and regulations impacting Intel may limit the company's ability to pursue transactions that benefit shareholders.


Man in a suit speaking at a podium with the presidential seal; raising hands in foreground; flags and a White House backdrop.
Credit: THE WHITE HOUSE

President Trump's deal with Intel followed a meeting between him and Chief Executive Officer Tan. During this meeting, President Trump had demanded Tan's resignation over his ties to Chinese firms.

  • Intel warns that the US government's 9.9% equity stake poses business risks.

  • Concerns include potential harm to international sales and limited access to future government grants.

  • The stake resulted from converting USD 11 billion in grants, including funds from the 2022 CHIPS Act.


Source: REUTERS

 
 
 

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