Oh boy, the fun started overnight. Mubadala twitted last night that they are selling 35 million shares of AMD, and converting their warrants for 75 million shares. This means AMD will get an infusion of $449 million cash. This is actually perfect timing for AMD to use this cash. If this had happened in 2018, AMD really didn’t need that cash then, because AMD couldn’t sell more Epyc anyway. They already made all the Radeon cards they cared to make. They didn’t need to make more Ryzen because OEMs weren’t going to use them. However, with the launch of Epyc2 (Rome), Ryzen 3rd gen and Navi, all around mid-2019; this is the perfect time for AMD to go all in and place big orders with TSMC and make all those chip for a major ramp.
A lot of headlines are misleading. They claim that Mubadala is dumping 35 million shares in the headline, then in the article they mention the conversion of 75 million warrants into shares. AMD has been reporting EPS based on fully diluted shares anyway. Plus, there is usually a lock up period for these 35 million shares (like 60 days in the past) before they are sold on the open market.
In July 2018, Mubadala sold 22 million shares. In August 2017 they sold 40 million shares and in March 2017 they sold 45 million shares. See below links. Everytime they sold, AMD share price always went down temporarily.
For those who are unfamiliar, here is a good description of the 6th amendment of the Wafer Supply Agreement (WSA) between AMD and Global Foundry, which AMD sold to Mubadala when AMD wanted to rid itself of the foundry business many years ago. In hindsight, it was a brilliant move because AMD did not have the deep pocket of Intel, and could never have competed with Intel in process anyway. TSMC and Samsung, on the other hand, got a lot of money from making smartphone chips and thus had a lot of money to reinvest back to gain the process lead over Intel. Therefore TSMC is now volume producing 7 nm now and 5 nm soon. AMD is taking full advantage of that now. There was a price to pay for AMD then (to get rid of Global Foundry). With the just announced 7th amendment, AMD is free to use TSMC or Samsung for 7 nm or below, without penalty or fees to GF. AMD will continue to use GF for 12 and 14 nm parts, like all their I/O dies, and other chips. It’s a win win!