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Intel Corporation (NASDAQ:INTC), a prominent player in the semiconductor industry with annual revenue of $53.07 billion, announced Wednesday that it has amended its Direct Funding Agreement with the US Department of Commerce, releasing the company from several prior obligations tied to federal support under the CHIPS Act. The update was disclosed in a press release statement and detailed in a filing with the Securities and Exchange Commission. According to InvestingPro data, Intel has shown strong returns in recent months despite facing profitability challenges in the last twelve months.
Under the amended agreement, Intel is no longer subject to previous project milestone requirements or certain other conditions for disbursements. The company certified that it has spent at least $7.87 billion in eligible costs on projects covered by the agreement. Requirements for Intel to share a percentage of cumulative free cash flow from these projects with the Department of Commerce have also been removed. In addition, most workforce policy requirements and other restrictions have been lifted, except for those mandated by law.
Key restrictions that remain include prohibitions on using CHIPS Act funds for dividends or share repurchases and limitations on change-of-control transactions involving prohibited parties or foreign entities of concern, as defined by the CHIPS Act. Other ongoing requirements include restrictions on expanding semiconductor manufacturing capacity in certain foreign countries, limitations on joint research and licensing with certain foreign entities, and rules governing the use of federal awards.
On Wednesday, Intel received $5.695 billion in accelerated disbursements under the Direct Funding Agreement. In connection with the transaction, the company issued the Department of Commerce 274,583,000 shares of common stock and a warrant to purchase up to 240,516,150 shares, exercisable under certain conditions. An additional 158,740,000 shares were issued into escrow for the benefit of the Department of Commerce, to be released as the government makes further disbursements to Intel under the Secure Enclave program of the CHIPS Act. Based on InvestingPro’s Fair Value analysis, Intel is currently trading near its fair value. Subscribers can access detailed financial health metrics, including growth, profitability, and momentum scores, along with comprehensive Pro Research Reports covering what really matters about Intel’s business fundamentals and future prospects.
The company stated that in the event of a breach of the remaining obligations, the Department of Commerce may have rights and remedies available, including potential repayment of some or all of the awards. With a market capitalization of $109.12 billion and a beta of 1.22, Intel remains a significant player in the semiconductor industry, though investors should note its current negative free cash flow position of -$10.9 billion over the last twelve months.
All information is based on the company’s statement and its SEC filing.
In other recent news, Intel has secured significant financial backing from the U.S. government, receiving a total of $8.9 billion in investments. This includes $5.7 billion in CHIPS Act grants, which were recently converted into a government equity stake in the company, as confirmed by Intel’s Chief Financial Officer, David Zinsner. The U.S. government’s investment, which also includes $3.2 billion from the Secure Enclave program, results in a 10% ownership stake in Intel. Analyst Ming-Chi Kuo from TF International Securities noted that while this investment stabilizes Intel’s valuation, it does not necessarily enhance its technological prospects. KeyBanc has reiterated its Sector Weight rating on Intel following the announcement. Additionally, Bernstein SocGen Group reported that the U.S. government will own 433.3 million new Intel shares, representing an 8.8% stake in the company. The financial support for Intel now totals $11.1 billion, including $2.2 billion in previously received grants. This development positions Intel as a national strategic asset, according to analysts.
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