With the President hyping it up on social media that the government’s acquisition of Intel stock will not be the last we see of its equity stake in Corporate America (see this Reuters article and this WSJ article about remarks from Kevin Hassett, the National Economic Council director), all eyes are on the first few companies who are striking deals. Yesterday, Intel filed this Form 8-K to disclose details of its agreement with the Department of Commerce – through which the US Government is becoming the company’s largest stockholder, with a 9.9% interest.

In addition to providing a description of the transaction, which I’m sure many folks are reading with interest, the 8-K updates the Company’s previously disclosed risk factors to reflect the deal’s conditions and impact. Here are a few that jumped out from the Item 8.01 disclosure:

•The transactions are dilutive to existing stockholders. The issuance of shares of common stock to the US Government at a discount to the current market price is dilutive to existing stockholders, and stockholders may suffer significant additional dilution if the conditions to the Warrant are triggered and the Warrant are exercised.

•The US Government’s equity position in the Company reduces the voting and other governance rights of stockholders and may limit potential future transactions that may be beneficial to stockholders. The transactions contemplated by the Purchase Agreement may result in the US Government becoming the Company’s largest stockholder. The US Government’s interests in the Company may not be the same as those of other stockholders. The Purchase Agreement requires the US Government to vote its shares of common stock as recommended by the Company’s board of directors, subject to applicable law and exceptions to protect the US Government’s interests. This will reduce the voting influence of other stockholders with respect to the selection of directors of the Company and proposals voted on by stockholders. The existence of a significant US Government equity interest in the Company, the voting of such shares either as directed by the Company’s board of directors or the US Government, and the US Government’s substantial additional powers with respect to the laws and regulations impacting the Company, may substantially limit the Company’s ability to pursue potential future strategic transactions that may be beneficial to stockholders, including by potentially limiting the willingness of other third parties to engage in such potential strategic transactions with the Company.

•The Company’s non-US business may be adversely impacted by the US Government being a significant stockholder. Sales outside the US accounted for 76% of the Company’s revenue for the fiscal year ended December 28, 2024. Having the US Government as a significant stockholder of the Company could subject the Company to additional regulations, obligations or restrictions, such as foreign subsidy laws or otherwise, in other countries.

As this NYT article notes, the government isn’t acting like a traditional hedge fund activist in the arrangements it has struck to-date – and the typical playbook doesn’t apply. One wrinkle is considering how director duties play out. This 2017 article discusses director duties in the context of the government ownership interests that resulted from TARP.

Public communications & disclosure may also need extra thought. Outside of its SEC filings, Intel is of course praising the deal, and its stock rose the day the deal was announced. While it’s not a novel concept to be enthused about a deal while also having to warn investors of the downsides, it’s less common to include quotes from other companies in the press release. And companies may need to take into account not only the threat of securities litigation from traditional stockholders, but also the pros & cons of this new flavor of “government backing” – and how their comments (or lack of comments) might impact the company’s ranking on the loyalty list.

– Liz Dunshee