August 26th news (editor ÏÄÜŠÐÛ)On Monday (August 25) local time, US chip company Intel issued a warning that the Trump administration's 10% stake in the company may pose a risk to its business, and that if the chip manufacturing business fails to meet certain thresholds, the government's shareholding may even rise to 15%.

The picture shows a screenshot of Intel's press release

In a document submitted to the U.S. Securities and Exchange Commission (SEC), Intel noted that the deal announced by U.S. President Trump on Friday made the federal government the company¡¯s largest shareholder, which could affect its international sales, while international sales accounted for 76 percent of its revenue.

Intel also said the agreement could lead to litigation and be opposed by foreign governments, business partners and even its own employees.

On August 22, the U.S. government reached an agreement with Intel to acquire Intel¡¯s 9.9% stake for approximately $8.9 billion, becoming one of its largest shareholders.

The U.S. government has become one of Intel¡¯s largest shareholders.

According to Intel, if the company holds a share of less than 51% in its ¡°Circle Operations¡± (i.e. chip manufacturing plants), the government has the right to purchase an additional 5% share at a price of $20 per share over the next five years, which is about to continue to rise from 10% to 15%.

Intel is one of the few companies with both chip design and manufacturing businesses, but its chip foundry business has continued to suffer losses in recent years, dragging down the company's operating conditions. Previously, Intel has tried to find solutions for its struggling chip foundry business, including options such as spin-off and sale.

It should be noted that in such notices, the list of risks is usually a formal enumeration, and not all risks will occur. However, Intel noted that government holdings are uncharted territory and that the company could face unusual risks.

Intel said: "Considering the few precedents in recent years where the U.S. government has become a significant shareholder in similar companies, it is difficult to foresee all the potential consequences."

It is understood that Intel will issue shares directly to the US Department of Commerce at a discount of $20.74 per share, which will dilute existing shareholder value, with a closing date of Tuesday or "as soon as possible thereafter".

It is worth mentioning that earlier this month, the Japanese Softbank Group announced an investment of $2 billion in Intel at a price of $23 per share.

As of Monday's close, Intel's stock price was $24.55 per share. Since the beginning of last year, Intel shares have fallen by about half, and now have a market cap of about $107.5 billion.

Further reading

Intel is just the beginning! Trump: Will hold more corporate shares

U.S. President Donald Trump on Monday praised the government¡¯s stake in Intel on his social platform Truth Social and said he was determined to reach more similar deals, namely hold more private company shares.

"I didn't pay a dime for the Intel share deal, it's worth about $11 billion, and all proceeds go to the United States," Mr. Trump wrote.

The picture shows a screenshot of Trump's post

He added: "Next, I will always make similar deals for our country. Those stupid people who are dissatisfied with this move don't realize that this move will bring more money and jobs to the United States."

"I will also help those companies that make such profitable deals with the United States. ¡­ I like to see their stock prices rise and make America richer and richer. Create more jobs for the United States! Who wouldn't want to make such a deal?"

Earlier in the day, White House economic adviser Kevin Hassett said the Intel deal was part of a broader strategy to create a sovereign wealth fund that could include more companies.

In a signature move to further expand the federal government's intervention in private companies, the White House announced on Friday that it would take a 10% stake in chip-making giant Intel. The total value of the stake is about $8.9 billion, some of which will come from grant funds related to the CHIP Act, and the rest will come from separate government grants for manufacturing secure chip projects.

In addition, the U.S. government has also obtained a license that allows the government to purchase an additional 5% of Intel shares if Intel is no longer a holding shareholder in its Xerox business in the future.

Establishment of a sovereign wealth fund

Although Hasset stressed that the government would not interfere with the company¡¯s operations, he said the move was part of an ongoing strategy.

"I think this is a very, very special situation because there's a lot of CHIP Act subsidies coming in," Hassett claimed, adding: "But the president made it clear way back during the campaign that he wanted the U.S. to finally start building a sovereign wealth fund. So I believe there will be more deals at some point, both in this industry and beyond."

It is that Trump signed an executive order earlier in February to launch the establishment of sovereign wealth funds. Such funds are typically invested by small, resource-rich countries to leverage natural resource revenues. According to data from the Sovereign Wealth Fund Research Institute, Norway is the global leader in such funds, with assets of about $1.8 trillion, with similar large funds in several countries in the Middle East.

Hassett said that while it is unusual for the U.S. government to hold large shares in private enterprises, it is not unprecedented, and he mentioned that after the financial crisis, we are definitely not selecting winners and losers, but this is not unprecedented.¡±

He added that the move is also part of the government's strategy, which also includes encouraging more companies to switch production back to the United States by imposing tariffs.

Gautam Mukunda, a lecturer in innovation and leadership at Yale School of Management, pointed out that this is a forced intervention by the government and an unprecedented intervention in a company that is not in a critical situation. Intel's current situation is different from that of the banking industry during the 2008 financial crisis. The situation is not the same.