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Mar 13, 2017

S3 BLACKLIGHT: Intel’s Mobileye Acquisition Cost Shorts $398 million

Intel Corp (INTC US) has agreed to buy Israeli automotive technology developer Mobileye N.V. (MBLY US) for $63.53/share, a 34.4% premium above its Friday closing price of $47.27, making the deal worth $15.3 billion. MBLY’s stock price traded at $62/share in premarket activity.

Intel is hoping to use the acquisition to leap frog onto the top rungs of the autonomous driving and drone application sectors. Last year, MBLY did not renew its partnership with Tesla (TSLA US) and worked with INTC on a self-driving car application with BMW (BMW GR).

After hitting its historical short interest high of $1.9 billion in June 2016, MBLY’s short interest declined to $1.2 billion by September as MBLY’s stock price hit its 2016/2017 high of $49.66. MBLY’s stock price has rebounded in 2017, up 24%, rallying from its recent low of $34.14 in December. Presently, MBLY’s short interest is $1.2 billion, up 28% for the year, after short sellers such as Citron Research called the stock overvalued compared to its peers.

Short sellers were up slightly on their MBLY short positions in 2016, making $5.6 million in net of financing mark to market P/L on an average short position of $1.3 billion. They were down in 2017 even before today’s acquisition announcement with losses of $239.5 million, or 19.86%, on an average short position of $1.2 billion. With MBLY trading at $62 in the pre-market, short sellers are down another $397.5 million today, increasing 2017’s year to date mark to market P\L loss to $637.0 million, or down 52.82% for the year. 

Unless short sellers think that the Intel deal will not come to fruition, we should be seeing a significant amount of MBLY buy to covers over the next couple of weeks. Most of the $1.2 billion in short positions should be licking their wounds and closing down their positions before the deal closes at $63.54.

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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