SEC Filings

Navitas Writes Off $7.2 Million Of A Preferred Stake After Investee's Financing Collapses

The power-chip maker also bought $5.0 million of Magnachip stock tied to a director and has yet to finish accounting for Claros.

Navitas Semiconductor, which designs gallium nitride and silicon carbide power chips, booked a $7.2 million noncash impairment in the third quarter on a preferred equity stake, cutting its value to an estimated $0.5 million, according to its 10-Q filed Tuesday. The quarterly report also details a $5.0 million Magnachip share purchase that counts as a related-party deal because of a Navitas director.

Why the stake lost its value

The investee was short of liquidity, still losing money and burning cash, reliant on outside funding, and a financing it had counted on fell through. Navitas valued the holding with a probability-weighted scenario model, a Level 3 measure built on unobservable inputs.

The charge landed in other expense, which was $7.2 million in the quarter against $59 thousand a year earlier. The company had put an aggregate $5.0 million into preferred interests of that entity during 2022, 2023 and 2024.

Equity investments now carry a total value of $7.5 million: $2.0 million of preferred stakes and $5.5 million of Magnachip common stock. The prior quarter's filing carried a different preferred-investment total of $9.2 million.

A director on both sides of Magnachip

On September 18, Navitas bought 1,461,988 Magnachip shares for $5.0 million. They were worth $5.5 million at September 30, a $0.5 million unrealized gain.

Director Cristiano Amoruso sits on Magnachip's board and has an indirect financial interest in both companies, the filing says. It says he took no part in negotiating the deals and that the audit committee approved them with him abstaining.

The purchase accompanies a strategic partnership under which Navitas licenses its GeneSiC silicon carbide technology to Magnachip.

Claros accounting still open

Navitas closed its purchase of Claros, which develops power management chips for AI data centers, on October 6. The price was 6,912,669 Class A shares, worth about $82.7 million, plus roughly $126 million in cash after deducting $9.4 million of cash acquired.

Up to 1,289,869 more shares are payable if Claros holders hit business milestones within two years of closing. Navitas says it cannot yet report total consideration, goodwill or pro forma figures because the valuation work is unfinished.

The shift toward AI shows in sales: U.S. customers made up 53% of third-quarter revenue against 21% a year earlier, while China fell to 29% from 52%. Operating cash burn for the first nine months was $66.9 million versus $34.8 million, with a $19.1 million rise in inventories among the drivers. The company expects continued operating losses and negative operating cash flow, and said its cash covers needs for the foreseeable future.

Navitas said it is still determining the acquisition-date fair values for Claros, including the contingent shares, and goodwill will follow once that work is done.