By Wallace Witkowski
GlobalFoundries Inc. shares closed Thursday below their initial public offering price on their first day of trading on the Nasdaq.
At 11:51 a.m. Eastern, GlobalFoundries /zigman2/quotes/230483311/composite GFS -1.58% shares dropped as much as 5% and later touched an intraday low of $44.48, before closing down 1.3% at $46.40 for a market valuation of $24.81 billion. Late Wednesday, the Malta, N.Y.-headquartered company priced shares at $47 apiece , the top end of its forecast range .
GlobalFoundries is a third-party silicon-wafer foundry, known as a fabrication plant, or “fab,” in industry parlance.
Those third-party fabs like GlobalFoundries make silicon wafers for the majority of chip makers that do not have their own fabs — companies like Advanced Micro Devices Inc. /zigman2/quotes/208144392/composite AMD -1.92% , Apple Inc. /zigman2/quotes/202934861/composite AAPL -0.49% and Nvidia Corp. /zigman2/quotes/200467500/composite NVDA -0.0086% . In fact, GlobalFoundries was a spinoff of AMD when the company wanted to get out of the fab business.
Thomas Caulfield, GlobalFoundries chief executive, told MarketWatch in an interview that the decision to go public now had a lot to do with building out capacity.
“We have to accelerate our capacity to meet our customers need. A lot of our demand is single-source, so customers are counting on us,” Caulfield told MarketWatch. “The number one priority and reason we’re going public is we’re using $1.5 billion of this raise as primary, as part of that cash, to fund that.”
“We are not demand-limited on our revenue, we are capacity-limited,” Caulfield said.
In its overall $6.5 billion capital plan, Caulfield said that the company plans to use $1 billion to expand fab capacity at its Malta headquarters. This all comes at a time when the company is just beginning to see profitability, following years of losses.
Caulfield noted that early results of this year’s September-ending quarter are signaling a profit of about $290 million to $300 million on revenue of about $1.7 billion.
GlobalFoundries distinguishes itself from other third-party fabs like Taiwan Semiconductor Manufacturing Co. /zigman2/quotes/204359850/composite TSM +1.15% and China’s Semiconductor Manufacturing International Corp. /zigman2/quotes/219534403/delayed CN:688981 +0.14% by not being dependent upon Taiwan or China, as hostilities between the two would be a huge problem for U.S. strategic supply. Recently, China expressed dissatisfaction at President Joe Biden reasserting the U.S. commitment to Taiwan’s defense.
The company’s public debut comes at a time when the world is working its way through a global chip shortage, with fabs having long customer backlogs, while IPOs are seeing their one of their biggest markets ever in terms of proceeds .
That said, the Renaissance IPO ETF /zigman2/quotes/207665280/composite IPO +1.93% is up nearly 6% year-to-date, compared with a 22% gain by the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.28% , and a 20% gain by the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.63% .