GlobalFoundries Files for Capital Raise Amid Chip Boom

GlobalFoundries looks set to join the 2021 capital-raising boom, filing for an IPO amid a pandemic-driven global chip shortage. News CompanyNews News MarketsNews CompanyNews CryptocurrencyNews PoliticalNews CityEconomicRecoveryTracker NYCRecoveryIndex PersonalFinanceNews Trends Malta,NewYork-basedGlobalFoundrieslookssettojointhe2021capitalraisingboom,filingonOct.4foraninitialpublicoffering(IPO)tocapitalizeontheinsatiabledemandforsemiconductormakersamidapandemic-drivenglobalchipshortage. KeyTakeaways GlobalFoundriesfiledforaNasdaq-listedIPOamid2021'scapitalraisingboomandglobalchipshortage.GlobalFoundriesintendstomaintainmajorityownershiponcegoingpublic.Thechipmakerhasoptimizeditsproductlinesandplanstospend$1.4billionboostingoutputbybuildingnewplantsintheUnitedStatesandSingapore.Netrevenuenudgedjustover$3billiontogrow13%yearoveryearinthefirstsixmonthsof2021.Thecompany'sdecisiontoraisecapitalsendsastrongmessagethatitisn'tinterestedinamergeroracquisitionamidthecurrentdemandforsemiconductors. Accordingtoitsprospectusfiling,theAbuDhabi-ownedcompanyplanstoraiseupto$1billion;however,theplaceholderfigurewilllikelychangewhenitfinalizesthetermsoftheIPO.InAugust,Reutersreportedthatthechipmanufacturercouldseekavaluationofaround$25billion. GlobalFoundriesalsomakesitcleartoinvestorsthatitintendstomaintainmajorityownershiponcegoingpublic."Mubadalawillcontinuetohavesubstantialcontrolafterthisoffering,whichcouldlimityourabilitytoinfluencetheoutcomeofkeytransactions,includingachangeofcontrol,andotherwiseaffecttheprevailingmarketpriceofourordinaryshares,"theprospectusreads. Thechipmaker,whicheyesaNasdaqlistingundertheticker"GFS,"hasassignedMorganStanley(MS),BankofAmericaCorporation(BAC),JPMorganChase&Co.(JPM),CitigroupInc.(C),andCreditSuisseGroupAG(CS)asleadunderwritersfortheIPO.GlobalFoundriesinitiallytargetedalate2022,early2023listingdatebutmovedthetimeframeforwardtotakeadvantageofthecurrentinvestordemandforcapitalraisings,peoplefamiliarwiththemattersaid. Anunderwriterisanypartythatevaluatesandassumesanotherparty'sriskforafee,whichoftentakestheformofacommission,premium,spread,orinterest. ThetimingoftheIPOalsocoincideswithapandemic-inducedworldwideshortageofsemiconductorsusedtopowereverythingfromlaptopstoautomotiveelectrics,whichhaspushedthePhiladelphiaStockExchangeSemiconductorIndex(SOX)up14%sofarthisyear.Bycomparison,thetech-ladenNasdaqComposite(IXIC)hasgained12.4%overthesameperiod,whiletheblue-chipDowJonesIndustrialAverage(DJIA)hasadded12.71%."Althoughthesupply-demandimbalanceisexpectedtoimproveoverthemedium-term,thesemiconductorindustrywillrequireasignificantincreaseininvestmenttokeepupwithdemand,"GlobalFoundriessaidinthefiling. Tomeetdemand,thecompanyhasoptimizeditsproductlinesandplanstospend$1.4billionboostingoutputbybuildingnewplantsintheUnitedStatesandSingapore.Currently,GlobalFoundrieshastwofactoriesinNewYorkState,oneinBurlington,Vermont,andoneeachinSingaporeandGermany.Thecompany—whichmanufacturerschipsforcontactpaymentdevices,electricvehicle(EV)batteries,andotherspecializedelectronicequipment—fillsordersforfellowchipmakersQUALCOMMIncorporated(QCOM),BroadcomInc.(AVGO),SamsungElectronicsCo.,Ltd.(005930.KS),andAdvancedMicroDevices,Inc.(AMD).ThelatterspunoutGlobalFoundriesina2008dealthatgaveownershiptoMubadalaInvestmentCo.,AbuDhabi'ssovereignwealthfund.Thechipmanufacturer'stop10customersaccountforaround75%oftotalrevenues,perCNBC. Althoughthecompany'snetsaleshaveflounderedinrecentyears—inpartduetothedivestmentofadivisionandarevenuereportingadjustment—netrevenuenudgedjustover$3billiontogrow13%yearoveryearinthefirstsixmonthsof2021.Furthermore,whilethechipmakerpostedanetlossof$301million,thefigurenarrowedsubstantiallyfroma$534millionlossinthecorrespondingyear-agoperiod. Divestmentistheprocessofsellingsubsidiaryassets,investments,ordivisionsofacompanyinordertomaximizethevalueoftheparentcompany.Alsoknownas divestiture,divestmentiseffectivelytheoppositeofaninvestmentandisusuallydonewhenthatsubsidiaryassetordivisionisnotperforminguptoexpectations. Thecompany'sdecisiontoraisecapitalsendsastrongmessagethatitisn'tinterestedinamergeroracquisitionamidthecurrentdemandforchips.InJuly,TheWallStreetJournalreportedthatsemiconductorbellwetherIntelCorporation(INTC)consideredmakinga$30billionbidforGlobalFoundries.However,it'sunderstoodthatGlobalFoundriesbackedawayfromapotentialtie-upwithInteloverconcernsthatadealcouldharmrelationswithitsothercustomers. ArticleSources Investopediarequireswriterstouseprimarysourcestosupporttheirwork.Theseincludewhitepapers,governmentdata,originalreporting,andinterviewswithindustryexperts.Wealsoreferenceoriginalresearchfromotherreputablepublisherswhereappropriate.Youcanlearnmoreaboutthestandardswefollowinproducingaccurate,unbiasedcontentinour editorialpolicy. CNBC.AbuDhabi-ControlledGlobalFoundriesFilesforU.S.IPOAmidWorldwideChipShortage.AccessedOct.12,2021. 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Startups HowWeWorkMakesMoney:SharedandOtherFlexibleWork-SpaceSolutions PartnerLinks RelatedTerms InitialPublicOffering(IPO) Aninitialpublicoffering(IPO)referstotheprocessofofferingsharesofaprivatecorporationtothepublicinanewstockissuance. more SpecialPurposeAcquisitionCompany(SPAC) Aspecialpurposeacquisitioncompany(SPAC)isapubliclytradedcompanycreatedforthepurposeofacquiringormergingwithanexistingcompany. more WhatIsVentureCapital? Venturecapitalismoney,technical,ormanagerialexpertiseprovidedbyinvestorstostartupfirmswithlong-termgrowthpotential. more WhatIsSaudiAramco? Theoilgiantistheworld'smostprofitablecompany,eclipsingeventechgiantslikeAppleandAlphabet. more ForeignDirectInvestment(FDI) Aforeigndirectinvestment(FDI)isapurchaseofaninterestinacompanybyacompanylocatedoutsideitsownborders. more DowJonesIndustrialAverage(DJIA)Definition TheDowJonesIndustrialAverage(DJIA)isapopularstockmarketindexthattracks30U.S.blue-chipstocks. more