Intel plans $15 billion share sale as turnaround rally lifts stock

Intel announced on Monday its intention to raise $15 billion through a share sale, seeking to bolster funding for its costly expansion of the chip contract manufacturing business. Once a leading player in the global chip industry, Intel has been investing significantly in new facilities and advanced packaging capabilities to challenge industry giants such as TSMC in contract chip manufacturing.

According to Bloomberg News, citing anonymous sources, Intel plans to expand the size of its share sale to approximately $20 billion, potentially pricing the offering at $95 a share or higher, which represents a 2.6% discount to the stock's Monday close of $97.52. Investor demand has reportedly surpassed $100 billion, and the deal could exceed $20 billion if the over-allotment option is exercised.

However, Reuters was unable to independently verify the report, and Intel declined to comment outside regular business hours. Intel's shares experienced a decline of over 4% on Monday, having nearly tripled so far in 2022, outpacing rivals AMD and Nvidia, as well as the Philadelphia Semiconductor Index's 75% rise. Analysts have attributed Intel's surging share price to the company's turnaround efforts, with this increase potentially boosting the chances of an equity raise to support its expansion plans.

Russ Mould, investment director at AJ Bell, noted that, given Intel's history of heavy share buybacks in the 2010s, which strained its balance sheet, raising capital now makes sense, particularly following a five-fold stock price increase since August last year. Intel's focus on AI agents has surged demand for central processing units beyond its manufacturing capacity, leading to a recent increase in its capital expenditure forecast for 2022 from $18 billion to $20 billion.

The company has also committed to high-volume production of chips using its 14A manufacturing process by 2028, after initially considering shelving this technology due to the absence of a major external customer. Intel's foundry unit recently secured Tesla as a 14A customer, and optimism for another major client grew after U.S. President Donald Trump suggested Apple would manufacture processors with Intel, though neither company has confirmed this.

In July, Intel announced a €5 billion ($5.77 billion) investment to upgrade and expand its chip manufacturing facilities in Ireland, accounting for more than 25% of its planned 2026 capital spending. The company plans to offer underwriters a 30-day option to purchase up to $2.25 billion worth of additional shares at the offer price, excluding any discounts.

JPMorgan Securities, Goldman Sachs, Morgan Stanley, and Citigroup Global Markets are serving as the joint book-running managers for this share sale.