A Trust Exercise?

The premarket is mainly quiet this morning. Major indices are down slightly, but basically little changed. We could see some negative influence from INTC at the open, after their announcement of a secondary offering. The $15 billion offering has pushed shares down about 5% in the premarket. The funds raised are reportedly targeted for capex, which shouldn't be surprising. What may take some observers off-guard is the timing, coming as it does just two weeks after the Situational Awareness flush.

The question we've got to be asking now is whether or not INTC management is viewing the recent bounce as an opportunity to capitalize on a stock valuation that they feel will likely decline in the months ahead. As Kapnotes has covered before, secondaries tend to cluster around inflated price peaks. We've seen no pricing announcement yet, but at $100/share the deal pencils out to 150 million shares, which approximates a reasonably busy day's volume for INTC. That kind of size could deliver downside pressure for the next few days. A lot will depend on the pricing. A deal priced deep "in the hole" could attract buyers and establish new support. If it prices around $97, where it's trading in today's premarket, the recovery horizon is less clear. A $4 discount is just not as compelling, but provides the same overhang of supply.

INTC is qualitatively different from most secondaries. Experienced traders will expect the deal to be well placed in steady, committed hands. Maybe we see some moderate pressure over the next few days, but it's unlikely that the timing of this offering represents the cash grab we've seen in other places.