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GlobalFoundries seeks $25 billion valuation in U.S. IPO as chip demand soars

EconomyOct 19, 2021 10:40AM ET
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© Reuters. FILE PHOTO: A Wall St. street sign is seen near the New York Stock Exchange (NYSE) in New York City, U.S., September 17, 2019. REUTERS/Brendan McDermid/File Photo

By Anirban Sen

(Reuters) -Chipmaker GlobalFoundries, owned by Abu Dhabi's sovereign wealth fund Mubadala Investment Co, is aiming for a valuation of about $25 billion in its initial public offering in the United States.

The IPO, one of the most hotly anticipated listings this year, is expected to cap a record year for flotations, after several big names such as Robinhood Markets Inc (NASDAQ:HOOD), Coinbase (NASDAQ:COIN) Global Inc and Roblox Corp took advantage of a boom in capital markets earlier this year.

Alongside electric-vehicle maker Rivian's stock market debut, GlobalFoundries is expected to headline an unusually crowded year-end IPO schedule.

IPOs in the United States have already raised an all-time record of over $250 billion this year, according to data from Dealogic.

In a filing to stock exchanges on Tuesday, GlobalFoundries set a price range between $42 and $47 a share for the IPO. At the upper end of the range, the company is expected to raise about $2.6 billion.

Reuters was first to report in August that GlobalFoundries had filed for an IPO in New York that could value the company at around $25 billion.

Including the "greenshoe option", which allows companies to sell additional shares during an IPO, GlobalFoundries could be valued at about $26 billion.

Funds associated with BlackRock Inc (NYSE:BLK), Fidelity Management & Research Company LLC, some affiliates of Koch Strategic Platforms LLC, Columbia Management Investment Advisers LLC and Qualcomm (NASDAQ:QCOM) Inc have committed to invest about $1.05 billion in the IPO.

Funds associated with Silver Lake Technology Management LLC have also committed to separately invest $75 million as part of a so-called concurrent private placement.

Mubadala, which is selling 22 million shares in the IPO, will hold an 89.4% stake in GlobalFoundries and control 89.4% of the voting power, following the listing and the private placement, according to the latest filing.

SKYROCKETING CHIP DEMAND

In its latest filing, GlobalFoundries said it estimated third-quarter revenue to come in at around $1.7 billion, at the higher end of expectations, representing a 56% jump from a year earlier.

GlobalFoundries' revenue had been in decline since 2018, but over the past 12 months the company's growth rebounded as worldwide demand for chips sky-rocketed.

The chipmaker has been consolidating its product lines and announced plans to expand in the United States and Singapore with new factories. It plans to build a second factory near its Malta, New York, headquarters, and spend $1 billion to boost output.

A shortage of semiconductor chips globally has forced the world's biggest chipmakers to ramp up worldwide production in the aftermath of the COVID-19 pandemic that caused manufacturing delays.

GlobalFoundries was created when Mubadala bought Advanced Micro Devices (NASDAQ:AMD) Inc's manufacturing facilities in 2009, and later merged it with Singapore's Chartered Semiconductor Manufacturing Ltd.

The company, which makes radio-frequency communications chips for 5G, automotive and other specialized semiconductors, counts Advanced Micro Devices and Broadcom (NASDAQ:AVGO) Inc among its customers.

GlobalFoundries plans to list on the Nasdaq under the symbol "GFS".

Morgan Stanley (NYSE:MS), BofA Securities, J.P. Morgan, Citigroup (NYSE:C) and Credit Suisse (SIX:CSGN) are the lead underwriters for the IPO.

GlobalFoundries seeks $25 billion valuation in U.S. IPO as chip demand soars
 

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