While modern society today focuses on the equality of all individuals, it’s interesting to note that if one were to piecemeal the human body based on its elements, the total value of an average person would amount to approximately $600. In particular, the phosphorus and calcium in our bodies feature the highest market value, implying that populations consuming fish and soybeans may indeed be worth more from a strictly commoditization perspective.
Of course, such a notion is a comical thought experiment, but one that bolsters the narrative for compelling technology firms like GlobalFoundries. A semiconductor fabrication specialist, GlobalFoundries is certainly worth more than the sum of its parts. Technically, you can apply a granular approach to assessing the company by its inventory of silicon, which ranges dramatically in price from regular grade to the hyper-pure variety.
But that would grievously miss the point about the company, which was already relevant before COVID-19. Particularly, GlobalFoundries’ emphasis on integrated circuits (ICs) that undergird virtually all technological innovations has been an indispensable focus. Add in the pandemic’s pressure on global supply chains, and the foundry’s upcoming initial public offering (IPO) becomes must-watch stuff.
When Is the GlobalFoundries IPO Date?
Quite simply one of the most anticipated new issues to make its mark on the IPO calendar this year, GlobalFoundries features exceptionally intense interest from both institutional and retail investors. A majority of the enthusiasm stems from the semiconductor supply crunch, especially of advanced ICs that form the backbone of digitalized applications and the research and development of next-generation solutions, such as autonomous vehicles (AVs).
In addition, prospective participants of the GlobalFoundries IPO should note the very real geopolitical implications of ICs and the broader semiconductor industry. Back in July 2020, The Lowy Institute warned that Taiwan — a small island nation that produces 90% of the semiconductors that U.S. tech firms rely on — could become a flashpoint for conflict as the world’s top 2 largest economies clash over resources.
Therefore, the importance of GlobalFoundries isn’t strictly limited to its upside potential. Like the circumstance surrounding industrial conglomerate 3M Co. (NYSE: MMM), which found itself under fire for issues related to N95 respirator masks last year, outside fundamentals will have a say on the computer chip specialist.
This dynamic is an element to watch closely as GlobalFoundries enters the public arena on Oct. 28. Under the terms of the deal, the Malta, New York-based company will offer 55 million shares with an initial price range between $42 to $47. At the middle of the estimate spectrum, GlobalFoundries will raise over $2.4 billion and command a valuation of $24.6 billion. Shares will trade on the Nasdaq exchange under the ticker symbol GFS.
To be sure, IPOs of any variety and associated with any industry are incredibly risky because investors are dependent on multiple variables. However, if you find comfort in numbers, GFS stock has it in spades. A broad partnership encompassing 16 investment banks is leading and supporting this IPO.
It’s important to note that scope alone does not guarantee anything for GFS stock. Prior to its second go-around, WeWork Inc. (NYSE: WE) suffered a catastrophic embarrassment in its first IPO bid. Frankly, its second coming isn’t getting off to the most auspicious of redemptive storylines, which emphasizes the point: be careful about any new issue.
GlobalFoundries Financial History
According to information provided by Mordor Intelligence, the semiconductor foundry market achieved a valuation of $83.32 billion last year. Moving forward, the research firm anticipates that the sector will hit a value of $126.91 billion by 2026, representing a compound annual growth rate (CAGR) of 7.3% from 2021 to the end of the forecasted period.
Despite the turmoil of the COVID-19 pandemic, the foundry industry was one of the biggest cynical beneficiaries of the crisis following an initial collapse during the early spring of 2020. Mainly, ICs undergird almost every innovation that we take for granted today, such as personal computers and smartphones. But ICs go beyond supporting necessary professional tools; for instance, they facilitate the high frame rate and realistic graphics of the latest video game consoles.
Granted, the size of the valuation pegged to GFS stock will make some investors nervous. As Reuters pointed out, before the first half of the year was over, U.S. IPOs hit an annual record. However, much of the enthusiasm is directed towards money-losing ventures, with GlobalFoundries not excluded in this description.
Still, it’s fair to point out that investors should not judge GFS stock solely on its underlying commodities, just like you wouldn’t ascertain an employee’s value based on their phosphorus content. Rather, the idea is to forecast GlobalFoundries’ pertinence to a post-COVID ecosystem.
Of course, the company’s past financial data is important and for GFS stock, it presents a nuanced picture. From 2018 through 2020, GlobalFoundries incurred declining annual revenue, from $6.2 billion to $5.8 billion to $4.85 billion last year. Although the semiconductor firm mitigated loss from operations to $1.66 billion in 2020 from an operating loss of $2.5 billion in 2018, the rich premium in GFS shares in light of the red ink isn’t the most encouraging statistic.
However, the trailing 6 months since June 30, 2021, demonstrate a much more favorable profile. Revenue at $3 billion exceeded the prior-year comparison by nearly 13%. Significantly, operating loss was a hair under $198 million, much more favorable than the $815.1 million loss incurred from the year-ago frame. Thus, bullish speculation centers on GFS stock turning a page fundamentally as COVID-19 imposes a semiconductor wake-up call.
Inescapably, much of the “new paradigm” narrative for GFS stock will benefit from cynical backdrops, especially politics, politics, politics. While the rancor in Washington shows no sign of slowing, it’s really the international arena with China that has investors eyeballing GlobalFoundries.
A spinoff of Advanced Micro Devices Inc. (NASDAQ: AMD), GlobalFoundries bills itself as the “only scaled pure-play foundry with a global footprint that is not based in China or Taiwan.” Further, in its IPO prospectus, management stated that the firm helps “customers mitigate geopolitical risk and provide greater supply chain certainty.”
Now, here’s where such lofty statements move beyond the realm of corporate idealization and into actual substance. Over the past few weeks, China sent its warplanes to Taiwan’s defensive zone in a show of force. In response, President Biden stated that the U.S. would come to the island nation’s aid, which brought up serious questions.
While the U.S. and its allies may determine that supporting Taiwan is a matter of economic life or death, the American public may be tiring of the decades of foreign policy bloodshed. And so long as a hot conflict is yet to occur, the federal government has a vested interest in insourcing critical infrastructures, which include everything from N95 respirator masks to advanced semiconductors.
Therefore, it’s possible that GFS stock is one of the most supremely relevant new issues of 2021, if not the most relevant.
How to Buy GlobalFoundries IPO (GFS) Stock
With GFS stock set to launch shortly, most retail investors must participate in the debut at the open. This method is the most straightforward if you already know how to buy stocks. If not, follow the steps below.
Step 1: Pick a brokerage.
While all brokerages will allow you to buy new issues at the open, you could narrow your list of best brokers to institutions that provide pre-IPO access (or shares at their initial offering price) for select enterprises.
Step 2: Decide how many shares you want.
As steps into the unknown, IPOs are inherently risky. Therefore, choose a balanced share count to mitigate downside risk.
Step 3: Choose your order type.
Before placing your order, understand these market concepts.
- Bid: The buyer’s best offer for a stock.
- Ask: The seller’s lowest acceptable price.
- Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
- Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
- Market order: Market orders guarantee fulfillment but only at the current rate.
- Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.
Step 4: Execute your trade.
Follow these steps to execute a market order:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
GFS Restrictions for Retail Investors
Before participating in an IPO, review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons. In short, anyone with privileged information toward a particular investment should avoid touching it.
Typically, underwriters of traditional public debuts distribute new issues to their choicest clients, almost always institutional investors. Naturally, this process boxes out retail participants. However, companies like ClickIPO democratize public launches by distributing pre-IPO shares to its members for select organizations.
Uploading Stability to Foreign Policy
One of the biggest lessons that the COVID-19 pandemic imposed is that capitalism cannot just focus on the bottom line. Otherwise, countries like the U.S. end up outsourcing their self-reliance to sovereign states that may not have their best interest in mind. Thus, an investment in GFS stock carries more weight than your typical IPO.