Business deals often involve risk — even when you’re dealing with the United States government.
Intel acknowledged several risks the company faces with the US taking a 9.9% stake in the chipmaker via an investment of $8.9 billion in common stock. It’s a rare deal in which the government is taking a financial stake in a publicly traded company.
Intel, which has been working on a turnaround, announced the deal on Friday, saying it reflected “the confidence the Administration has in Intel to advance key national priorities and the critically important role the company plays in expanding the domestic semiconductor industry.”
In a Monday filing to the Securities and Exchange Commission, the company outlined a number of “risk factors” related to the US government’s investment, from negative impacts on shareholders to hindering future opportunities. Companies often add to their risk factors to fend off litigation — these sections can run for pages in quarterly filings, addressing everything from cyberattacks to pandemics.
Dilutes shares of existing stockholders
Intel said in the filing that because it was issuing stock to the government at a discount, it would dilute the shares of existing stockholders. The company added that shares could be diluted further if the government purchases more shares in the future.
Reduces the voting power of existing shareholders
Intel said the deal could make the US government its largest stockholder, adding that it would reduce the voting rights and power of existing stockholders.
“The US Government’s interests in the Company may not be the same as those of other stockholders,” the filing said.
The SEC filing also said the US government’s powers could “substantially limit” Intel’s ability to pursue future transactions that would benefit shareholders, including by deterring some third parties from engaging with the company.
It could hurt Intel’s international business
Intel said 76% of the company’s sales came from outside the US in the 2024 fiscal year. The company’s non-US business could be negatively affected by the US government’s status as a major stockholder, which could also subject the company to additional regulations and restrictions abroad.
Could limit Intel’s options for other government funding
Intel said in the SEC filing that the deal, which involves converting government grants into an equity stake in Intel, could limit its ability to secure government grants in the future.
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Intel also said it has other existing grants with government agencies and could pursue more in the future. The company said the deal could put those at risk, either by agencies being unwilling to provide grants in the future or by also expecting to convert their grants into equity investments. Those outcomes could limit Intel’s ability to access capital, increase its cost of capital, or spike its operating costs.
A lot of unknowns remain, and several factors could disrupt the deal
Intel said the deal completion timing was uncertain, “and there can be no assurance the Company will receive the funds on the timeline or in the amounts anticipated.”
It also said the deal could be affected by changes in laws as well as changes in the federal administration or Congress.
The financial, tax, and accounting impacts of the deal were also still uncertain, the company said, adding its analyses had not been completed due to the “complexity of the transactions.”
Other potential risks, including lawsuits
Intel said that given the scarcity of precedents for similar deals in the US, “it is difficult to foresee all the potential consequences.”
“Among other things, there could be adverse reactions, immediately or over time, from investors, employees, customers, suppliers, other business or commercial partners, foreign governments or competitors,” the SEC filing said.
It added that the deal could also result in lawsuits or increased public and political scrutiny of Intel.
