Back when chip stock Intel (INTC) first brought in its new CEO, Lip-Bu Tan, he made quite the promise, vowing to buy $25 million worth of stock from his own money within 30 days after being installed as CEO. And recently, that buy was completed. Yet even this major insider buy did little to fire up investors, and Intel shares dove over 3.5% in Wednesday afternoon’s trading.
Lip-Bu Tan completed his purchase just days ago, noted reports, and though a large portion of his compensation was set to be in the form of stock options to begin with, the direct purchase of shares makes his personal wealth that much more connected to Intel’s own fate. He stood to land $14.4 million in performance stock, a further $9.6 million in options, a $25 million “option grant for new hires,” and another $17 million grant for performance stock.
It was originally intended as a way to signal confidence to investors, as well as a means to give him a clear quantity of skin in the game. Now, Lip-Bu Tan not only stands to lose a substantial amount of money in the future if he fails to turn Intel around, but he also stands to lose immediate cash on the same outcome.
Try and Get It Back
Meanwhile, we know that Intel’s planned construction of a facility in Ohio has hit snags recently, to the point where the Ohio government is reconsidering some of its grants and tax breaks. But a new report from Dave Yost, Ohio’s Attorney General, says that that may not work out so well. Apparently, the language involved in the agreement between Ohio and Intel is “…so broad you could drive an 18-wheeler through it,” Yost noted.
Yost went on to declare that the language made the agreement “not very enforceable,” which leaves Ohio with few options for getting its money back from Intel. There was even a section, Yost pointed out, that would allow Intel to keep the grant money outright simply by stating “…they still intend to perform.” The state could beat this, Yost noted, but it would be “…a tough case to make.”
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 27 Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 46.09% loss in its share price over the past year, the average INTC price target of $23 per share implies 1.35% downside risk.
