Comment by MyOutfitIsVague a day ago
> the government made an $8.9 billion investment in Intel common stock, purchasing 433.3 million shares at a price of $20.47 per share, giving it a 10% stake in the company
> The United States paid nothing for these Shares, and the Shares are now valued at approximately $11 Billion Dollars
I don't understand. Can somebody explain to me how the government made an investement, bought shares, but paid nothing?
Yes, but its semiconductor industry so its complicated.
Intel got money via grants from the chip act and via other governments. Part of the reason they got that money was to help them build the chip fans in the USA and funding research and workforce in other nations. The fact Intel has claimed its slowing construction basically is a full 180° spin and will set them back in manufacturing ability.
Previous CEO strategy was focused on heavy investment in catching up on manufacturing ability. But once you get stuck on a node it becomes expensive to catch up.
New CEO is clearly trying to shed weight. They have let go of a significant % of workforce, stopped certain projects all together, and seem to be basically selling off parts of their technology and assets to keep cashflow positive.
Given the current CEO and his history and connections, plus the US government involvement it looks like a rocky situation.
That's precisely how private citizen Trump ran his businesses as well. Make an agreement with contractors to get work started knowing full well those agreements were never going to be honored. Instead, refuse to pay anything forcing contractors to renegotiate at much worse terms vs not getting anything at all. The whole time banking on these contractors not willing to fight in court. That was the art of the deal
> Isn't that pretty bad, Darth Vader style changing of previously agreed on deals ?
There has been some changing of deals on Intel's part as well, with indefinite delays on US fab buildouts the US passed a bill to subsidize. Now the US is taking some equity for its debt.
Far more dramatic Government intervention took place in 2009 when the US bailed out domestic automakers, including equity. Don't recall as much angst about that among the laptop class. Because Obama.
> Isn't that pretty bad, Darth Vader style changing of previously agreed on deals ?
haha, is this the first you hear of this Trump guy? He rutinely breaks deals, like all the fucking time. (I get that this was not his deal, he breaks those too)
A deal with Trump is worth nothing.
> Can somebody explain to me how the government made an investement, bought shares, but paid nothing?
Extortion.
Recent Supreme Court decisions have permitted the government to unilaterally cancel disbursements, even in flagrant violation of the plain text of law, impervious to preliminary injunctions, and then put up procedural hurdles to significantly increase the cost of reaching a final judgment in favor of the plaintiff. See, e.g., the most recent decisions issued this week in National Institutes of Health v. American Public Health Assn.: https://www.supremecourt.gov/opinions/relatingtoorders/24
So presumably the administration's deal was, give us what we ask for and you'll get the money Congress awarded, or don't and wait 1-2 years for any case to wind its way through the courts.
Also, the timing is mighty suspicious, with this NIH decision being published yesterday (21st) and the announcement happening this morning (22nd). I wouldn't be surprised if Intel's lawyers were waiting (perhaps slow-walking the admin) for this particular NIH decision, and when it came down in favor of the government advised the CEO the only way to get the remaining billions disbursed in any reasonable amount of time was to acquiesce to Trump's demand and close the deal.
I had seen that, but I don't consider that "paying nothing". That's paying something. I'm also confused how it's a "grant" if it's completely transactional. That's not a string attached, that's just a purchase. So I guess it's just political spin on all sides.
I think a better rephrasing is "government is giving $8.9B from the CHIPS act in exchange for a 10% stake in the company"
Depends on who you ask. Trump himself seems to think the US is getting 10% for free. I think that's a fair assessment given that these grants were already supposed to be paid out to Intel, without any kind of equity stake promised.
Worth noting that Intel is the only company that had these kinds of shenanigans pulled with their grant. Samsung, TSMC, Micron and others were granted similar funds without any kind of withholding or demands for equity from the federal government.
> Worth noting that Intel is the only company that had these kinds of shenanigans pulled with their grant.
Sure, but Intel's new CEO is making a lot of noise that indicates that Intel is maybe not going to be able/willing to build some-to-many of the things the CHIPS money paid for.
Giving FedGov a 10% stake in the company [0] is better than taking the money back for nonperformance, wouldn't you say?
[0] Which -as I understand it- was the sort of thing that was done for those finance companies that were Too Big To Fail when all that fraud^W novel financial engineering eventually caught up to them.
> Depends on who you ask. Trump himself seems to think the US is getting 10% for free.
When you're really familiar with extortion, everything looks like an opportunity for extortion.
Yes, but in this case the restaurant was already empty of customers on most evenings.
Breaking into an empty locked building is still breaking and entering.
My point was that Intel is already in need of rescue investment all on its own.
I'm just pointing out a limitation of the Mafia analogy.
Socializing a corporate venture with peace time debt seems counter to the ideals of free market capitalism. Even the takeover of "government motors" (GM) during the Great Recession left many concerned about government overreach. Boeing killed people with a bad product, and they only faced a fine without direct equity takeover.
The clearer picture comes from Reuters[0], as usual:
>The government will purchase the 433.3 million shares with funding from the $5.7 billion in unpaid CHIPS Act grants and $3.2 billion awarded to Intel for the Secure Enclave program.
So the same playbook hes taken across the board: cast aspersions on leadership, withhold duly appropriated money in contravention to the law. Rinse repeat.
[0]: https://www.reuters.com/business/trump-says-intel-has-agreed...
The answer is in the paragraph in between the two you quoted from. The money for the purchase has already been appropriated by Congress and awarded to Intel. The awards didn't previously have this giant string attached where Intel gives stock in return. But now they do.
And it makes sense that Intel is spinning it as a generous investment from the gov't, but the gov't is spinning it as a free gift from Intel. Neither account really paints the full picture, but each one paints themselves as coming out ahead.