While there were quite a few assumptions taken in the asset calculations from the last article, market value, and how it is applied by investors and courts, is even fuzzier, but we can ball park a few numbers. AMD’s market value, if we consider it as reported for a stock investor, also called market capitalization, would be about $1.29 billion.
Mubadala will be buying 58 million shares at the lower of 2.13 cents (the average of the 20 closing prices in the days leading up to Dec 12) or the average of the 20 closing prices in the days before the deal closes. If the deal closed last weekend, the extra 58 million shares would increase AMD’s market value by less than $125 million.
Mubadala is also getting 35 million warrants for AMD stock. Even if we treat these as fully converted (i.e.: at what they would be worth if used and turned into shares) that would add less than $75 million to AMD’s value, for a total increase of less than $200 million, or about 15%. Because this system of valuation is based on share price times number of outstanding shares, and the 58 million shares plus 35 million warrants, if converted, would be about a 15% increase in outstanding shares, this calculation of value can’t get up to the one third increase Intel needs to argue a change of control and cut AMD’s license to make AMD chips.
Another system of calculating market value, which when calculated this way is also called enterprise value, is
(i) (shares outstanding X share price) + long-term debt – cash
It may not make immediate sense to add market capitalization to long-term debt and subtract cash, but it represents what you would have to pay to buy out all of a business’ shareholders and long-term creditors (be the only owner and not owe any money), less the cash that you would get along with the company, since you can use that to offset what you spent on the business.
With this method, we would have a starting value of
(607.190 million X 2.13) + 4.874 billion – 1.341 billion = 4.826 billion
AMD is transferring $1.2 billion of debt to TFC, but AMD owns 34.2% of TFC, so the amount of debt they no longer own works out to $790 million. Market cap is affected as above with an extra $200 million, but we’ll take $125 million back out because AMD is getting it in cash (we’re ignoring the penny per warrant, or $350 thousand, AMD would get from Mubadala for converting the warrants)
(2.13 X 700.19 million) + (4.874 - .790) billion – (1.341 + .125) billion = 4.109 billion
As with assets, market value, at least in this interpretation, actually goes down.