r/valueinvesting
Yes, INTC Should Raise Equity
Author argues INTC should issue equity to fund Foundry growth, analyzing the EPS impact of a theoretical 10% dilution.
- Recent share price increase provides a favorable window to raise capital.
- Equity raise can fund Foundry growth, with mathematically justified EPS impact.
- Issuing new equity will result in a 10% dilution of existing shares.
- Equity dilution inherently reduces earnings per share for current shareholders.
Considering INTC's recent share price increase, should they raise equity in order to take advantage of the growth opportunity in Foundry? This article does the math behind a theoretical 10% equity dilution + EPS impact.
the yield problem is the real issue. throwing more cash at fabs doesn't matter if 18A can't attract customers. raising equity just gives them a bigger pile of money to burn through if the node strategy falls apart
Diluting by 10% at these prices to fund Foundry projects is a massive cost of capital. Intel's issue is not a lack of cash. They have Chips Act subsidies and Brookfield infrastructure partnerships to fund construction. The bottleneck is node yields and external customer commitments. If they cannot get customers to commit to the 18A node, adding another $15B in cash will not fix the underlying return on capital. What hurdle rate are you assuming for the new fab capacity?
"Brookfield infrastructure partnerships "
I'm not familiar with this. Could you please elaborate?
if they don't raise equity here, i dont see how you could trust management as a shareholder
If they do/will, There's no better time for them than now lol...