Something absolutely huge just popped up. Ladies and gents, it looks like (NASDAQ: AMD) AMD is making plans to sell off 20% of its shares to a private firm called Silver Lake. The private equity firm is a well known outfit that also owns a chunk of Dell. Not only does it have the capital to invest, but this could be the big break for AMD, since it will finally get the cash it so desperately needs. This could also be the first step in AMD going private and a possible comeback of one of the most influential companies of the silicon valley.
AMD reportedly getting ready to sell off 20% of its shares to Silver Lake - planning to go private
Silver Lake has invested money in brand names like Alibaba, Avago, GoDaddy,Motorola Solutions, Opera Solutions. (NASDAQ: AMD) AMD stock has been trading at $1.88 and the company’s market capitalization (share price multiplied by shares outstanding) is around 1.434 billion. 20% of that is around 300 Million US dollars, which, it goes without saying, isn't alot. To put that into perspective, AMD originally paid 5.4 billion to buy ATI back in 2006. This leads me to believe, that much more may be going on than meets the eye (elaborated below).
Here is the thing however, the question that remains unanswered is how exactly will (NASDAQ: AMD) AMD get the required 20% of its shares to sell to Silver Lake. In a publicly traded corporation, the shares are the property of the shareholders and in such a huge decision, the company can rarely do anything without their consent. In a scenario like this there are only two options (Open Market Vs Primary Shares) in which an equity firm can buy shares, one of which is highly improbable and the other - what is probably going to happen.
AMD will have two options once Silver Lake buys 20% of its stock. The most obvious route is for it to buy back its shares and go private, allowing Silver Lake to hold the share that it bought from red. The other way includes staying public. This is kind of pointless, since the floatation of more shares will dilute the value of the individual share, not to mention would be a cheap investment considering the deep pockets Silver Lake possesses. Nonetheless, it is still a possibility. Unless AMD chooses a route 3, a hitherto unknown strategy, the most obvious answer is that it will go private.
Now usually a company can become private by buying back a portion of its shares via an initial tender offer and gradually lowering its shareholder pool till only the desired people are left. Then, it simply delists itself from the stock exchange and the transition to a private entity is complete. Silver Lake can either buy 20% of AMD shares from the open market (unlikely) at the current price or buy it from AMD after they float primary shares. The transition to a private company can then begin.
It remains to be seen at this point what the exact course of action would be for (NASDAQ: AMD) AMD - but if one thing is certain, it is that very interesting times are ahead for the tech giant. The source, Fudzilla, also mentions that the CPU designer Jim Keller could be poised to be in the leading position if the company undergoes a restructure.
Ofcourse, if this turns out to be true, most analysts will come to this conclusion and we will see AMD's stock shoot up in value in the near future. Because if you are planning to buy AMD, or just want a quick buck, this is it. With a buy back possibly looming in the future and a current price (at the time of writing) of $1.88, this would make for a very profitable investment.
Finally, the rumor tag has been put on this post as a very necessary formality, since (NASDAQ: AMD) AMD has not officially confirmed anything. My personal opinion on the report (to those who are interested) is that this is pretty much happening. Not only is this something that was bound to happen with publishing losses after losses, but the timing holds up too. With Silver Lake pumping private equity into the faltering giant, we could see red make a comeback like never before.