Why Indie Semiconductor Rallied Today

A major financial publication leaked that the high-growth chip company was exploring options, including a sale.

Shares of automotive semiconductor company Indie Semiconductor (INDI 13.19%) rallied on Monday, up 13.2% as of 3:11 p.m. ET.

The company, which makes a variety of automotive tech chips, might be considering a sale, according to Bloomberg. Obviously, when news of a potential sale comes out, that usually means investors will buy the stock hoping for a quick buyout at a premium, thus yielding a quick short-term gain.

Indie going not-so-“Indie?”

On Monday, Bloomberg reported that Indie had hired advisors to consider strategic options for the company, including a potential sale. Bloomberg cited anonymous “people familiar with the matter.” The publication was pretty vague, and said Indie could attract either private equity firms or another industry player as a buyer. Of note, this wasn’t the first news of a potential takeover. Late April saw the first inklings of chatter around an Indie takeout, immediately after the stock fell to year-to-date lows.

While Indie is still a rather small company, with just $235 million in trailing-12-month revenue and a $1.25 billion market cap, it has actually assembled a rather broad array of automotive technologies, spanning lidar, radar, and computer vision for autonomous applications, as well as wireless charging inside the cabin and plug-in fast charging technologies for EVs. Indie has developed these technologies both internally as well as through acquisitions, proclaiming a tuck-in acquisition strategy akin to chip giant Broadcom, which has used an acquisition strategy to reach enormous size over the past 20 years.

Given its broad array of technologies, Indie could be an attractive asset for another larger automotive semiconductor company. Of note, that part of the chip sector is actually in a downturn right now, which means if a recovery eventually materializes, buying Indie even at a significant premium to today’s stock price could yield a favorable long-term result.

Indie has had a relatively disappointing time as a public company

Indie has actually delivered some stellar growth numbers, but its stock has not performed accordingly. After going public via a special purpose acquisition company (SPAC) in mid-2021, Indie has rarely traded above the $10 price at which all SPACs begin trading. Even after today’s spike, the share price is only around $7.50.

Thus, the company may very well find more success as a privately owned entity or as a division of a larger automotive tech giant.

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