US government stake in Intel has jumped 300% to US$36 billion

[LONDON] The value of the US government stake in Intel has increased four times to hit a value of about US$36 billion after the chipmaker’s financial outlook showed a resurgence in sales.

That’s the equivalent of an almost US$27 billion return on paper since Intel and the government announced the investment in August. CEO Tan Lip-Bu secured the unconventional investment following a charm offensive to win over the White House and repair relations with US President Donald Trump, who’d called for Tan’s ouster.

The White House announced a deal that will likely see the US taxpayer owning 433.3 million shares of the company once certain conditions are met. The agreement priced the shares at US$20.47 apiece, valuing the stake at US$8.9 billion. Taxpayers own more than 270 million shares directly, with some shares held in an escrow account. The paper valuation assumes that the US exercises all of its acquisition rights under the deal.

Besides its investment in Intel, the Trump administration has announced more than a dozen other deals to bolster critical industries, including rare earths, steelmaking and nuclear power. Trump is now considering a possible financial rescue of struggling Spirit Airlines that could give the US government the option to own as much as 90 per cent of the carrier once it emerges from bankruptcy.

“We were the chip capital of the world,” Trump told reporters in Washington on Thursday (Apr 23). And now Intel is “coming back. All the chip companies are coming back”.

Intel shares rose 24 per cent to US$82.54 in New York on Friday. The percentage gain, Intel’s biggest since 1987, propelled the stock to an all-time high. BLOOMBERG