Advanced Micro Devices stock went under
strong selling pressure just before the completion of its long-standing acquisition of chipmaker
scheduled for Monday.
Shares of Advanced Micro (ticker: AMD) fell 10% on Friday to $113.18, extending the stock’s two-day decline to more than 15%.
While the decline partly reflects the market selloff and the continued slump in tech stocks, it would also appear that the all-stock nature of the deal is creating additional selling pressure. Shares of Xilinx, which trade at the same rate as AMD, also fell 10% on Friday. This is the worst one-day decline for AMD shares since March 2020 and the largest two-day decline since October 2018.
The terms of the agreement provide that holders of Xilinx (XLNX) will receive 1.7234 AMD shares for each share of Xilinx they hold. As of January 14, Xilinx had 248.4 million shares outstanding, implying that these shareholders will receive 428.1 million new AMD shares as part of the transaction. Prior to the transaction, there were 1.2 billion AMD shares outstanding. Former Xilinx holders will therefore own approximately 26% of the combined company, assuming they stick around.
The question is whether Xilinx shareholders will keep their AMD shares or sell them. In some cases, the shares will almost certainly be sold. For example, like AMD, Xilinx is also a component of the
; index funds are unlikely to hold on to their additional AMD shares.
In a research note Friday, Wells Fargo chip analyst Aaron Rakers tweaked his financial model for AMD to reflect the deal. For calendar year 2022, it raised its expected revenue estimate to $25.4 billion from $21.5 billion, but it cut its earnings per share forecast slightly to $3.96 per share from $4. $.02. It projects 13.5% growth for the mixed company on average through 2024, reflecting expected growth of 15% for AMD core and 7% growth for Xilinx.
Write to Eric J. Savitz at [email protected]