It's no secret that AMD needs some financial help these days. The ongoing -- albeit lightening -- price war with Intel
The story so far
Back in April, AMD took on $2 billion in new debt to keep the party going. Morgan Stanley
So now, the Mubadala Group has bought 49 million freshly minted shares directly from AMD, at last night's closing price of $12.70 per share. After transaction fees and such, that translates into an 8.1% ownership stake in the processor pasha and 8.9% overnight dilution. It would have taken about two days to fill an order this size at AMD's average trading volumes, and a single-shot order would certainly have driven up the price quite a bit. Morgan Stanley advised both parties on the deal but didn't actually buy or sell anything; Merrill Lynch
But the shares didn't lose value in proportion to the dilution -- in fact, the price right now is about the same as last night's closing level. In other words, your average investor seems to think that the new cash was worth the share count pain. No more, no less.
Who are these guys?
If you're saying "Mubu ... Mama ... Who?" you certainly aren't alone. It's an investment firm based in Abu Dhabi, United Arab Emirates, and wholly owned by that government. Mubadala's highest-profile investments in the West so far have been a 5% stake in Italian sports car designer Ferrari and a 7.5% claim in private American investment group Carlyle. But as far as I can tell, this is the first time Mubadala has bought into a publicly traded Western company.
The UAE involvement stops with a substantial shareholder stake, though -- no board seats or advisory relationships included. Mubadala CEO Khaldoon Khalifa Al Mubarak called AMD "a spirited competitor and innovator led by a strong and visionary management team. We see significant opportunities for long-term growth and value creation." And the warm fuzzies were mutual, as AMD CEO Hector Ruiz called the newcomer "a world-class investor" and pledged the cash to improving "R&D, product innovations and manufacturing excellence."
Carlyle said that Mubadala was "among the most sophisticated investors in the world." Northrop Grumman
Daddy, I'm scared!
Should investors worry about the Arabian finger in AMD's pie? Judging by the caliber of the other well-known partners, perhaps we shouldn't. I'm not very familiar with Mubadala's social responsibility track record, but it feels pretty good to have them take just a minority stake without direct influence on the company's strategy, leadership, or direction. So for now, I'll welcome the new money and hope that it helps put 45nm development back on track. But my portfolio is sleeping with one eye open until further notice.
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Fool contributor Anders Bylund is an AMD shareholder but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure looks good in a keffiyeh and caftan. The Motley Fool HQ stands on Carlyle-owned ground.