Intel Warns That U.S. Government Ownership May Harm International Sales; Trump: Will Continue Similar Transactions with Intel

On Monday, Intel stated that the U.S. government's ownership of 9.9% of its shares may pose risks to its business, including potentially harming international sales and limiting its ability to access future government funding. In a securities filing, the company listed new risk factors following the Trump administration's decision to convert $11 billion in government grants into equity in Intel, which represents the latest unconventional intervention by the Trump administration in U.S. companies.

Additionally, Intel's CEO, Pat Gelsinger, stated in a video released by the U.S. Department of Commerce on Monday that the company does not need government funding from the Trump administration. Gelsinger said, "I don't need this grant, but I genuinely hope the U.S. government can become my shareholder."

However, the above documents submitted by Intel have raised doubts about the U.S. government's investment. For example, Intel pointed out that it is currently unclear whether this transaction will lead other government entities to attempt to convert existing grants into equity investments or whether they may be unwilling to support future grants.

The shares of Intel will be used to acquire the remaining $5.7 billion in grants under the semiconductor subsidy program of the 2022 CHIPS and Science Act, as well as the $3.2 billion granted to Intel by the Biden administration for the "Secure Enclave" program.

The above document states that "to the maximum extent permitted by applicable law," Intel's obligations under the CHIPS and Science Act will be considered fulfilled, except for the "Secure Enclave" program. The document also mentions that Intel's non-U.S. operations may be affected by the U.S. government as a major shareholder, as this could subject the company to additional regulatory or restrictive measures, such as foreign subsidy laws in other countries.

Last year, sales outside the United States accounted for 76% of Intel's total revenue, while revenue from China accounted for 29% of the total. The deal between Trump and Intel was reached after Trump met with Gelsinger, who had previously demanded that Gelsinger resign immediately from his position as CEO of the company.

Earlier, Republican Senator Tom Cotton wrote a letter to the chairman of Intel's board of directors, questioning Gelsinger's relationship with Chinese companies and raising concerns about recent criminal cases involving Cadence Design, where Gelsinger had previously served as CEO for a long time.

In addition, Intel pointed out that the stocks issued to the U.S. government at a discount below the current market price would dilute the equity of existing shareholders. The Trump administration purchased shares of the company at a price of $4 less than the closing price of $24.80 on Friday. On Monday morning, Intel's stock rose 2% to $25.25.

The above document stated that the Trump administration's significant additional power in influencing regulations affecting Intel could limit the company's ability to conduct transactions that are beneficial to shareholders.

On Monday, Trump posted on his social media platform "Truth Social," stating, "I bought Intel without spending a penny, and it was worth approximately $1.1 billion. All of it went to America. Why are those 'fools' upset about this? I will do such deals all day for our country. I will help companies that make such lucrative deals with America. I like to see their stock prices rise, making America richer. More jobs for America!! Who wouldn't want to do such a deal?"

Notably, a behind-the-scenes report by the Wall Street Journal on Intel's contact with Trump indicated that the request for Gelsinger to resign immediately after Trump publicly posted on social media caused panic among Intel's leadership. They immediately contacted the White House to request a meeting, and Gelsinger eventually traveled to Washington and spent several hours discussing with his advisors on Sunday, August 10th.

According to sources, Gelsinger's team reassured him that the president would listen to his opinion, as "Trump likes to meet with CEOs," even those he had publicly attacked before. The next day, Gelsinger met with Trump, U.S. Commerce Secretary Brian Montgomery, and Treasury Secretary Janet Yellen at the White House.

Gelsinger tried to convince Trump that he was not a Chinese spy and that supporting Intel aligned with the long-term interests of the U.S. government, as Intel is one of the few American manufacturers in the field of computer chips that power the modern economy.

Gelsinger's arguments were persuasive. Trump developed a liking for him and no longer demanded his resignation. But there was a cost: as a reward for Trump's support, the government proposed that Intel allow the U.S. government to take a stake in the company. The Trump administration decided to convert nearly $9 billion in grants promised to Intel under the CHIPS and Science Act into a 10% equity stake in the company, an unusual arrangement that made the U.S. government the largest shareholder of Intel.

Original: www.toutiao.com/article/1841443885823307/

Statement: This article represents the views of the author.