Crash-avoidance Car Firm Mobileye Reportedly Eyes Monster $1b IPO

Jerusalem-based company had profits of some $35 million last year, but high IPO valuation reflects expected business growth.

Ofer Vaknin

The Israeli automobile collision-avoidance technology firm Mobileye is planning on raising as much as $1 billion on the Nasdaq exchange in an initial public offering of shares, The Wall Street Journal reported over the weekend. The news was confirmed by sources close to the company.

It is expected that the IPO will go forward in the last quarter of 2014, based on a valuation of $3.5 billion to $5 billion for the company as a whole. If it comes to fruition, such an IPO would be among the largest ever floated by an Israeli high-tech company on Nasdaq.

Mobileye filed a confidential IPO prospectus earlier this month in the United States, a move that recent legislation permits for companies with revenues under $1 billion. The final terms of the IPO are expected to be set closer to the actual offering, based on prevailing market conditions at the time.

Goldman Sachs and Morgan Stanley have been tapped as lead underwriters in the effort, The Wall Street Journal said. The financial daily also cited a source who said the final figure for the IPO could come in at under $1 billion.

Last July, in advance of a potential IPO, Mobileye carried out a private placement of shares for a 25% stake in the company, which generated $400 million from investors (including firms in the automotive industry). That was the largest private placement ever carried out in Israel. Prior to that, between 2007 and 2011 Mobileye raised another $160 million.

Mobileye was founded in 1999 and is incorporated in The Netherlands. The business has always focused only on applying its technology to the automobile industry. It is considered a world leader in the collision-avoidance field. Its initial technology was based on picture-identification technology developed by Amnon Shashua, a professor at the Hebrew University of Jerusalem who is also the company’s chairman. He founded the firm with Ziv Aviram, Mobileye’s CEO. Each currently owns a 10% stake in the company. Mobileye’s development center is in Jerusalem’s Har Hotzvim business park, where the firm has a staff of about 200 engineers.

The company’s technology is built around a single camera that is installed between the vehicle’s rear-view mirror and the windshield. The device contains a processor that is capable of identifying other vehicles as well as pedestrians and cyclists, and it provides drivers with a warning when it detects the risk of collision. The major advantage of the singe-camera approach to collision avoidance over the uses of radar or several camera is the price, Shashua previously told TheMarker. “Radar costs the customer $2,000, while the cost of a camera runs between $100 and $150,” he explained.

Among the firm’s most prominent investors is Bank Leumi, which made its initial investment in 2008 through its Leumi Partners investment banking affiliate. Leumi Partners has invested some 60 million shekels ($17.3 million) in the venture, and has an ownership stake of about 3% in Mobileye after selling off a portion of its interest last year. The Israeli car import firm Colmobil is among other Israeli stakeholders in the company.

Mobileye markets its products directly to car manufacturers, and the devices can be found in all models of Cadillac sold in Israel, as well as in new Volvos. A number of other manufactures are also clients, including BMW, Ford, Honda, Hyundai, Citroen, Toyota and Chrysler. Although it is most commonly featured in luxury cars, the product is expected increasingly to be used in lower-priced models, as the price tag on the technology drops and as regulatory agencies demand collision-avoidance systems in Europe and the United States.

The product is also available for sale directly to the consumer and is on the market in Israel for 4,000 shekels (less than $1,200). Last August, the Israeli Tax Authority began offering incentives to auto importers who install systems of this kind, but, as far as is known, the program has not sparked major demand.

Mobileye has not hesitated to take legal action against competitors. For example, it sued a firm that developed a product called iOnRoad that offers a system through motorists’ cell phones, warning when other vehicles are getting too close. Mobileye claims the other product violates its patents. The case is still pending.

Last year, Mobileye had revenues of some $85 million and profits of about $35 million. The high valuation placed on the company for purposes of the IPO reflects expectations of improved financial results in coming years, as its business grows through increased sales to carmakers around the world.