Globalfoundries: Secondary Offer Not Enticing and Likely Not One-Time

Globalfoundries announced it will repurchase $200 million of shares at $50.75 per share from its largest shareholder, Mubadala Technology Investment Company, as part of the latter’s $950 million offering. We maintain our fair value estimate at $42 as Globalfoundries will not receive any proceeds from the offering and the size of the repurchase is not significant. The deal is not favorable to Globalfoundries and potential subscribers since we view Globalfoundries as overvalued for its lower profitability than peers. Shares are down 5% after hours upon the news. We think the offering could be the second phase of a multiyear exit plan for Mubadala following its IPO. We anticipate Mubadala to offer small batches of shares regularly, especially near the peaks of upcoming semiconductor cycles.