Trump got Intel to give the US 10% ownership of Intel. In practice, how does that work? This article says:
The president proposed that Intel give the U.S. government a 10 percent stake in exchange for the CHIPS Act money it had been awarded.
I honestly don’t understand how that works. You just say “give me 10% in exchange for something I already gave you?”
And somewhere else (I can’t find it now) I read that the agreement did not give the US government 10% of the votes, so it would own 10% of the company but not have any vote. How is that possible? What kind of shares are these? Can they be bought and sold?
So, just in view of the nuts-and-bolts of the deal, how does this actually work?
The government is buying a 9.9% stake in Intel and they are using the portion of the CHIPS act that has been awarded, but not yet delivered, as well as an additional DoD award.
The shares are common stock and do have voting rights, but the government has agreed to vote with the company (in general). I’m not sure if that agreement can be enforced, but at 9.9% it might not matter.
But the 2022 Chips act didn’t involve taking ownership of the company. So how can it be used that way now? I’m trying to stay factual but it sounds like simple extortion.
Also, the NPR article says
the government agreed to vote with the company’s board on matters requiring shareholder approval, with limited exceptions.
What are the exceptions? What if the board wants something that the government doesn’t want? What if the government just decides at some point that it would rather have a vote?
9.9% of common stock would make the US government the largest single shareholder ahead of Vanguard (8.9%), BlackRock Advisors (6.4%), and State Street (4.7%). The supposed agreement to “vote with the company (in general)” is meaningless, and given that size of a stake it could likely swing decisions notwithstanding the the influence that the government has over financial institutions. One would expect that a non-participating agreement would involve preferred stock rather than common (voting) stock, although there may be other issues at play.
Not quite that much, and even if they did, they don’t have the ability to levy government sanctions or impose arbitrary regulations upon other players. The federal government has an outsized role in any business it is involved with because it can largely make the rules about oversight and regulations, which is why the Supreme Court has in the past typically ruled against nationalization or the government taking a significant ownership stake in a public company.
Associated Press article on the ‘deal’:
Is this unusual? Outside of wartime or the need to assure a public service that may not be profitable without being a monopoly (i.e. Amtrak) it is atypical but has been done in cases where failure of a major corporation would have dramatic adverse economic consequences such as when the government took over conservatorship of mortgage lenders Freddie Mac and Fannie Mae (although these were always capitalized by the federal government), or took at temporary 60% stake in General Motors in 2008. However, as the Associated Press noted, this often comes at a cost:
Although rare, it’s not unprecedented for the U.S. government to become a significant shareholder in a prominent company. One of the most notable instances occurred during the Great Recession in 2008 when the government injected nearly $50 billion into General Motors in return for a roughly 60% stake in the automaker at a time it was on the verge of bankruptcy. The government ended up with a roughly $10 billion loss after it sold its stock in GM.
In the case of Intel, while it is certainly struggling to compete in the market it isn’t clear that the government taking an ownership stake is advantageous. Trump has previously called for the CEO of Intel, Lip-Bu Tan, to resign after less than a year at the helm, but Tan has been has been implementing a cost-cutting plan to curtail expenses and streamline operations that hasn’t had a chance to bear fruit. I don’t think market investors are particularly enthusiastic about Intel but then they’re throwing money and crazy market valuations for Nvidia based upon ‘compute’ required for training generative AI models that is clearly a bubble, so who the hell knows what will happen when it pops. Certainly the government doesn’t have any particularly expertise in microchip design or fabrication so it isn’t as if this facilitates bringing in subject matter experts to fix problems, and in general presents a whole host of conflicts of interest and potential for corruption if Howard Lutnick (or whomever is calling the shots) gets Tan and his management team removed and replaced with Trump cronies, which is a typical thing that is done to government-invested or nationalized businesses under autocratic regimes.
Yahoo! finance has Blackrock at 8.92% and Vanguard Group at 8.82%. even if that changes (or has changed), Intel is no stranger to managing and navigating large institutional investors.
The federal government is not just a ‘large institutional investor’; it literally has the power to regulate, impede, interfere with investment in, and even potentially dismantle a company that it elects to be deserving of such treatment. Gaining this kind of control is a hallmark of authoritarian regimes as in the co-opting and installing ‘friendly’ industrialists to head critical industries and consolidate businesses even when they are re-privatized as happened under the Nazi regime in post-Weimar Germany:
It is also worth bearing in mind how much Donald Trump and many people he has appointed have refused to divest themselves of financial conflicts and used their positions to openly enrich themselves and benefit their business associates and family members with favorable treatment, sole-source contracts, and the outright accepting of ‘gifts’ in blatant violation of federal law and the intent of the Emoluments clause.
Vanguard is almost entirely an index investor and Blackrock (iShares) is similar. So is State Street AFAIK (they sell SPDR ETFs, nicknamed Spiders). For years, Vanguard’s policy was to automatically vote with management. Recently they’ve started a process where Vanguard shareholders choose a proxy management firm and Vanguard votes in the resulting proportion.
Active investors need to be feted by corporations, passive investors do not. Vanguard and Blackrock (with trivial exceptions) are passive investors. The largest active investor appears to be Geode Capital Management, LLC at 2.23% (thanks CaveMike for the yahoo link).
Dubious? Intel had an earnings call on 7/24/2025. Participants follow. Vanguard and Blackrock were unsurprisingly not on the list. Why would they care? They are index investors.
Conference Call Participants
Aaron Christopher Rakers - Wells Fargo Securities, LLC, Research Division
Benjamin Alexander Reitzes - Melius Research LLC
Joseph Lawrence Moore - Morgan Stanley, Research Division
Ross Clark Seymore - Deutsche Bank AG, Research Division
Stacy Aaron Rasgon - Sanford C. Bernstein & Co., LLC., Research Division
Timothy Michael Arcuri - UBS Investment Bank, Research Division
Vivek Arya - BofA Securities, Research Division
William Stein - Truist Securities, Inc., Research Division
MAGA Nationalistic Socialism with Republican characteristics.
[Moderating]
A reminder that this is FQ. The mechanics of the deal are fair game, but political commentary on the implications of the deal belongs in a different forum.
It’s an investment, and a big one, but strictly from the standpoint of the stock holdings the word “takeover” in the thread title is not accurate. (I won’t speculate on other control that the government could exert [per moderator direction], but that would be because it’s the government, not because of 10% ownership.)
I know it is possible to issue non-voting shares. When Ford went public several decades ago, they issued non-voting shares, leaving total control to the family. I believe they were eventually converted to full voting shares.
I was surprised to see that they would be voting shares. Avoiding even the hint of politicisation or undue influence would seem to be a good idea.
Is there a structure for a controlled buyback? Just leaving the country with a stake in the company without some sort of exit strategy would seem to be a generally bad idea - for both parties. It would also make competitor companies feel a bit better. A government that has a vested interest in one company will inevitably have some conflict of interest, so being clear about mechanisms for ending the situation would seem prudent all around.
