While chip stock Intel (INTC) was riding high on a big new infusion of cash from SoftBank (SFTBY), the high proved to be a good exit point for a lot of investors as Intel went forth to see if anyone else was interested in a discount equity offer like SoftBank was. This move hit shareholders badly, and Intel lost nearly 7.5% in Wednesday afternoon’s trading.
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We remember that SoftBank got a slight discount for the $2 billion worth of shares it picked up, paying just $23 a share for shares that were valued at $23.66 when Intel closed on Monday. But now, Intel is taking that idea around to other major shareholders, offering them a discount on equity stakes in exchange for cash.
This comes in the wake of reports that the United States government wants an equity stake as well in exchange for the CHIPS Act money that it has already put up. This move is not really sitting well with investors either, as the money suddenly becomes “dilutive,” according to CNBC reports. Thus, if that becomes dilutive, and SoftBank gets a special deal, and if Intel gets any more big shareholders interested in purchasing equity at a discount, then what does that do to the regular shareholder?
Maybe Not Such a Bad Idea After All
However, the CHIPS Act money becoming an equity stake may not be such a bad idea for Intel, reports note. Some suggest that the benefits of a “Trump deal” would turn out to be worth every bit as much, if not more, than the CHIPS Act money itself would be.
Reports suggest that the Trump administration’s move to support Intel by taking a direct equity stake represents “…ambitions to revive domestic semiconductor manufacturing…” While some capitalism purists might take a dim view of the government taking equity stakes in anything, there is little denying that such a move would help revive Intel, and thus, America’s chip capacity. Having a clear mandate direct from the Trump administration will also be helpful in its own way; just ask Boeing (BA).
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 27 Holds and three Sells assigned in the past three months, as indicated by the graphic below. After an 18.22% rally in its share price over the past year, the average INTC price target of $22.36 per share implies 4.61% downside risk.
