ON Investors: Pomerantz Law Firm Launches Investigation!

Introduction: On July 1, 2026, Pomerantz LLP announced it is investigating potential claims on behalf of shareholders of ON Semiconductor Corporation (“onsemi”) after a sharp drop in ON’s stock price (www.prnewswire.com) (www.prnewswire.com). The probe centers on whether onsemi’s management engaged in securities fraud or other unlawful practices related to a major acquisition announcement (www.prnewswire.com). On June 25, 2026, onsemi unveiled an agreement to acquire Synaptics Incorporated in an all-stock deal valued around $7 billion (www.prnewswire.com). Under the terms, Synaptics shareholders would receive 1.35 onsemi shares for each Synaptics share (www.prnewswire.com). The news was poorly received by the market: onsemi’s stock plunged 23.7% in one day (falling $28 to about $90.65 by June 26, 2026) (www.prnewswire.com). Synaptics stock, by contrast, rose modestly on the takeover premium (www.thestreet.com) (www.thestreet.com). The drastic sell-off in ON has prompted class-action law firms to explore whether onsemi’s board breached fiduciary duties or misled investors about the deal’s merits (www.prnewswire.com). This report provides a deep dive into onsemi’s fundamentals – covering its dividend policy, financial leverage, valuation, and key risks – to contextualize the recent red flags and open questions for investors.

Dividend Policy & Capital Returns

No Dividend History: Onsemi has never paid a cash dividend on its common stock since its IPO (www.sec.gov). The company’s board has instead favored share repurchases as the primary method of returning capital to shareholders. In fact, onsemi’s debt agreements historically restricted dividends and buybacks to a combined $350 million per year (www.sec.gov), and the firm consistently opted to maximize buybacks within those limits. As of mid-2026, onsemi’s dividend yield remains effectively 0%, reflecting its policy of reinvesting profits or returning cash via stock buybacks rather than cash dividends (www.marketscreener.com). This approach contrasts with some peer semiconductor companies (e.g. Texas Instruments) that pay regular dividends, highlighting onsemi’s focus on growth and share value over immediate income returns.

Aggressive Share Repurchases: Onsemi’s commitment to buybacks has been substantial. Under a $3 billion program (2019–2025), the company repurchased about $2.1 billion of stock – including roughly 100% of its 2025 free cash flow devoted to buybacks (investor.onsemi.com). In late 2025, the board doubled down and authorized a new $6 billion share repurchase program to run from 2026 through 2028 (investor.onsemi.com). The new plan followed the expiration of the prior program and signaled confidence in the company’s long-term value. Indeed, onsemi spent $346 million on share repurchases in just the first quarter of 2026, an amount equal to about 160% of that quarter’s free cash flow (www.sec.gov) (www.sec.gov). This indicates onsemi is even willing to deploy cash reserves to continue buybacks during cyclical troughs. The capital return strategy is therefore clearly tilted toward share reduction and “return of capital” via stock price appreciation, rather than return of cash via dividends. Management has stated that even after the Synaptics acquisition announcement, they remain committed to existing capital return plans (suggesting buybacks will persist) (www.onsemi.com). Investors should note, however, that heavy buybacks can be curtailed if liquidity is needed elsewhere – for example, funding an acquisition integration or if debt covenants tighten. For now, onsemi’s lack of dividend and robust repurchase activity underscore a growth-oriented capital allocation policy, albeit one that relies on the market’s confidence to reward share reductions with higher per-share value.

Leverage and Debt Maturities

Debt Profile: Onsemi’s balance sheet carries a moderate amount of debt, with $3.0 billion in principal outstanding as of year-end 2025 (www.sec.gov). Notably, much of this debt comes from low-coupon convertible notes rather than high-interest loans. The debt mix includes $804.9 million of 0% Convertible Senior Notes due 2027, $1.5 billion of 0.50% Convertible Notes due 2029, and $700 million of traditional 3.875% Senior Notes due 2028 (www.sec.gov). Onsemi had fully repaid its revolving credit borrowings by late 2025, leaving the entire $1.5 billion revolving credit facility undrawn and available as liquidity backstop (www.sec.gov). With over $2.55 billion in cash and short-term investments on hand at the end of 2025 (www.sec.gov) (www.sec.gov), the company’s net debt was effectively under $500 million – a very modest leverage position relative to the size of its operations. This conservative net leverage gives onsemi flexibility: it could tap its revolver or cash balances to cover upcoming obligations if needed.

Maturity Schedule: The debt maturities are staggered across 2027–2029, limiting near-term refinancing pressure. The first major maturity is the $804.9 million zero-coupon notes due September 2027, followed by the $700 million 3.875% notes due 2028, and then the $1.5 billion 0.50% notes due 2029 (www.sec.gov). The convertible notes could convert to equity before maturity if onsemi’s share price stays high enough – for instance, the 0% notes are in the money with a conversion price around $74.34/share (www.sec.gov) (ON shares trade well above that level mid-2026), meaning holders may opt to convert to stock rather than await cash repayment. By contrast, the 0.50% notes convert at roughly $156.78/share (www.sec.gov), a threshold currently above ON’s market price, so those may remain a cash liability unless the stock appreciates dramatically. Overall, onsemi’s leverage is quite manageable: gross debt is about 1× annual EBITDA in a good year, and net debt is close to zero given the large cash war chest. The company’s interest burden is very low – weighted average interest was only ~2.1% in 2025 (www.sec.gov) – and in recent years onsemi even earned more interest on its cash than it paid on debt (www.sec.gov) (www.sec.gov). This implies healthy interest coverage under normal operating conditions. For example, in 2024 onsemi’s operating income was $1.77 billion, almost 28× its $62 million interest expense (www.sec.gov) (www.sec.gov). Even in the unusually weak 2025, when one-off charges drove GAAP operating income down to $84 million, onsemi’s cash interest expense (~$71 million) remained just about covered (www.sec.gov) (www.sec.gov). The company’s revolving credit line and cash provide further coverage, ensuring it can meet debt obligations comfortably barring an extreme downturn.

Capital Structure Considerations: One consequence of the all-stock Synaptics acquisition is that onsemi will be issuing equity instead of taking on new debt for the $7 billion deal (www.thestreet.com) (www.thestreet.com). This choice prevents any increase in financial leverage – an important point since onsemi had only recently reduced its debt (paying off $375 million on its revolver in late 2025) (www.sec.gov). However, issuing shares dilutes existing shareholders by roughly 12% (Synaptics owners will own ~12% of the combined company) (www.thestreet.com) (www.thestreet.com). Essentially, onsemi is leveraging its equity rather than its balance sheet for this expansion. Management likely judged that preserving a strong balance sheet was worth the trade-off of dilution. From a credit perspective, onsemi remains in a solid position post-deal: no immediate debt maturities, ample liquidity, and unchanged gross debt. Barring unexpected losses or further large acquisitions, the company should retain investment-grade characteristics. For equity investors, the low leverage means less financial risk, but the increased share count shifts focus to whether the Synaptics merger can drive sufficient earnings growth to offset dilution – a concern we explore under risks.

Valuation and Comparative Metrics

Earnings Volatility: Onsemi’s valuation requires careful interpretation because of its earnings volatility in recent years. The company enjoyed a semiconductor boom in 2021–2022, but by 2023–2025 faced a cyclical correction and inventory write-downs. In 2025, onsemi’s GAAP net income plunged to just $121 million (only $0.29 in EPS) amid heavy restructuring and impairment charges (www.sec.gov). This makes trailing P/E ratios appear extremely high (over 300× based on 2025 GAAP earnings). However, 2025 was an anomaly – excluding nearly $900 million in one-time charges for layoffs, factory asset impairments, and excess inventory, the company would have been far more profitable (www.sec.gov) (www.sec.gov). Analysts expect a strong rebound in 2026–2027 as the cycle improves. At a stock price around $90–95 in mid-2026, onsemi’s forward P/E for 2026 is ~40×, dropping to about 22× for 2027 based on consensus earnings forecasts (www.marketscreener.com). This implies investors are already looking past the trough earnings toward a recovery by 2027. By comparison, many large analog and power semiconductor peers trade in the 20×–25× forward earnings range in normal times. Onsemi’s multiple near the high end of that range reflects both its recent depressed earnings and the market’s expectation of future growth acceleration.

EV/EBITDA and Peer Context: Using enterprise value (EV) to EBITDA, onsemi’s valuation appears more moderate. With an EV around $36 billion (market cap ~$35 billion plus minimal net debt) and estimated normalized EBITDA in the $3–4 billion range (onsemi generated ~$3.3 billion EBITDA in 2023 before the slump), the stock trades roughly around 10–12× EV/EBITDA on a mid-cycle earnings basis. This is in line with or slightly cheaper than some peers in the power and analog chip space, especially considering onsemi’s above-average growth prospects in electric vehicle (EV) and industrial markets. For instance, Texas Instruments – a more mature analog chipmaker with slower growth but steadier margins – recently traded at ~15× EV/EBITDA and a ~20× forward P/E, while offering a ~2% dividend yield (contrasting onsemi’s zero-yield) (www.marketscreener.com) (app.getquin.com). Analog Devices and NXP Semiconductors also tend to trade in the low-teens EBITDA multiples. Onsemi’s valuation thus does not appear outright expensive relative to peers, if one believes its earnings will normalize and grow with the secular trends it’s targeting (automotive electrification, industrial automation, “physical AI” at the edge, etc.). It’s worth noting that onsemi’s price-to-book ratio around 5× is higher than many peers – reflecting the market’s appreciation of its intellectual property and strategic position, but also a potential premium that could erode if execution falters (www.marketscreener.com).

No Dividend Yield: As mentioned, onsemi provides no dividend yield to factor into valuation (www.marketscreener.com). Investors looking for income must rely on share price appreciation or occasional buyback-driven EPS bumps for returns. The lack of dividend puts more pressure on management to deliver growth and stock gains, since shareholders don’t receive a cash cushion while waiting. In contrast, peers like Texas Instruments or Microchip Technology pay substantial dividends, which can support their stock valuations during down cycles. Onsemi’s bet is that reinvesting cash (or returning it via buybacks) will generate superior long-term capital gains. This makes onsemi’s valuation highly contingent on growth execution – the market is unlikely to reward the stock with a high multiple unless it demonstrates steady revenue and profit expansion, given there’s no yield offset. In summary, at mid-$90s per share, ON stock is priced for a solid earnings recovery by 2027 and beyond, and while not outrageously priced compared to peers, it leaves little margin for error if the company hits further bumps in the road.

Risks and Red Flags

Acquisition Backlash: The recent Synaptics deal exemplifies the kind of strategic risk that has spooked onsemi investors. The 23% stock plunge on the deal announcement signals a strong market view that onsemi may be overpaying or misstepping with this acquisition (www.prnewswire.com) (www.thestreet.com). At $7 billion (onsemi’s largest deal ever (www.thestreet.com)), Synaptics will consume a lot of management attention and shares – yet synergy realization is far from immediate. Onsemi itself projects the transaction will not be accretive to earnings per share until 18 months after closing (which is expected in mid-2027) (www.onsemi.com). This implies profits might only start getting a boost by 2028 or later, leaving investors diluting their ownership now and waiting several years for payoff (www.thestreet.com) (www.thestreet.com). Analysts are divided: KeyBanc voiced concern that Synaptics’ focus on smartphone and consumer electronics doesn’t align well with onsemi’s strength in automotive and industrial chips (www.thestreet.com). Such a mismatch could mean onsemi is venturing outside its circle of competence, or at least that the cross-selling opportunities are limited. On the other hand, Jefferies analysts defended the deal as “strategically sound” since it broadens onsemi’s product portfolio into Edge AI processing and connectivity – potentially a growth avenue (www.thestreet.com). Even supportive analysts, however, concede a major worry: the deal does little for near-term earnings (www.thestreet.com) (www.thestreet.com). Investors are essentially asked to be patient and trust management’s long-term vision of “Physical AI” market leadership (www.thestreet.com) (www.onsemi.com). The red flag is that management’s optimism (e.g. promising a $30 billion increase in addressable market by 2030 (www.onsemi.com) (www.onsemi.com)) may not convince a skeptical Wall Street without tangible results. If Synaptics integration proves harder than expected or if consumer-device markets remain soft, onsemi could find itself with dilutive equity issuance and no commensurate gain – a scenario that might further depress the stock or invite activist investors.

Legal and Governance Risks: The Pomerantz investigation itself highlights governance concerns. While no lawsuit has been filed yet for the Synaptics matter, Pomerantz LLP is probing whether onsemi’s officers breached fiduciary duties or misled investors in connection with this acquisition (www.prnewswire.com). This could encompass questions like: Did management properly disclose its M&A plans and rationale? Did onsemi overstate Synaptics’ benefits or underestimate the impact of dilution? Any finding of false or overly rosy statements could lead to a shareholder lawsuit. It’s worth noting this isn’t the first time onsemi’s management has come under shareholder scrutiny. In late 2023, onsemi was hit with a securities class action alleging that the company misled investors about the stability of its revenues. During 2023, CEO Hassane El-Khoury had touted onsemi’s long-term supply agreements (LTSAs), especially for its silicon-carbide EV chips, as providing “very predictable” multi-year revenue streams (legalclarity.org). However, by the third quarter of 2023 onsemi had to warn of a sharp slowdown in automotive demand, and its Q3 results underwhelmed; the stock collapsed ~22% in one day (from $83.5 to $65.3 on Oct. 30, 2023) when the extent of softening demand became clear (legalclarity.org) (legalclarity.org). Onsemi’s market cap slid from a ~$46 billion peak in August 2023 to under $30 billion by November (legalclarity.org). Shareholders sued, claiming the company oversold its “predictable” outlook and failed to warn that customers could delay EV chip orders despite LTSAs (legalclarity.org) (legalclarity.org). That class action (filed in early 2024) is ongoing (zlk.com). The existence of an earlier fraud lawsuit is a red flag for corporate transparency. It suggests a pattern where onsemi’s management might paint an overly optimistic picture (whether about contract stability or acquisition benefits) that later needs retraction, bruising investor trust. At a minimum, investors should keep an eye on onsemi’s communications versus actual results, and note that repeated credibility lapses can impair the stock’s valuation multiple. Any new lawsuit stemming from the Synaptics deal would compound these governance risks and potentially distract management (and add legal expenses).

Cyclical and Operational Risks: Onsemi operates in the notoriously cyclical semiconductor industry, with significant exposure to the automotive and industrial sectors. The 2022–2023 volatility in demand for chips (shortages turning to gluts) showed up clearly in onsemi’s results – e.g. a 15% YoY drop in Q2 2023 revenue (legalclarity.org) and the massive inventory write-offs in 2025 when certain products became oversupplied (www.sec.gov). A core risk is that onsemi’s end markets (EVs, factory automation, etc.) experience demand swings due to macroeconomic factors. For instance, higher interest rates and economic uncertainty in 2023 made automotive customers “cautious” and willing to delay orders (legalclarity.org), which undermined the rosy forecasts tied to onsemi’s long-term contracts. Going forward, a potential risk is slower EV adoption or a pause in industrial capital expenditure, which could leave onsemi again with excess inventory or idle capacity after it ramped up for growth. Additionally, onsemi is investing heavily in silicon carbide (SiC) technology for EVs – a market with big opportunity but also increasing competition (from players like Wolfspeed, Infineon, STMicro, etc.). Execution missteps in manufacturing the new SiC materials or the risk of key customers dual-sourcing could impact onsemi’s growth and margins.

Operationally, the integration of Synaptics poses risks as well: Synaptics brings product lines (like IoT connectivity and touch/display controllers) that are new to onsemi’s portfolio. Ensuring a smooth integration of engineering teams and sales channels will be critical. There’s a risk that cultural differences or high turnover at Synaptics (if employees leave during the merger) could erode the value of the acquired technology. Moreover, Synaptics was said to be “cash-strapped” prior to the deal (www.tomshardware.com) – if true, it might indicate underlying challenges such as declining sales or thin margins that onsemi will need to fix. The margin profile of Synaptics (which has historically operated in consumer electronics components) might be different from onsemi’s core business; if Synaptics’ gross margins or R&D intensity don’t align, the combined company’s profitability could be lower than expected. Onsemi insists the deal will keep gross margins “consistent with onsemi’s long-term model” and yield $200 million in annual cost synergies (www.onsemi.com), but achieving that will require stringent cost control and possibly workforce reductions or product pruning at Synaptics. Any shortfall in synergy realization is a risk to the projected accretion timeline.

Finally, geopolitical and supply-chain risks cannot be ignored. Onsemi has global operations (fabrication plants, assembly/test facilities, etc.) and serves customers worldwide. U.S.–China trade tensions and export controls on semiconductor technology could impact onsemi – for example, if restrictions tighten on certain chip sales or if onsemi’s manufacturing in Asia faces tariffs/sanctions. Supply chain disruptions (like those seen during the pandemic) also pose risk since onsemi relies on timely delivery of raw wafers, equipment, and third-party services. While the company has been working to secure supply (even signing LTSAs with suppliers), unpredictable events (natural disasters, geopolitical conflicts) could disrupt production or logistics, affecting revenues.

In summary, onsemi’s risk profile reflects a company at a strategic crossroads: it’s making big bets (on M&A and new technologies) in pursuit of long-term growth, but with that comes execution risk, high investor expectations, and less room for error. The stock’s harsh reaction to the Synaptics deal and the history of legal challenges suggest that investors are acutely sensitive to any signs of overreach or over-optimism by management.

Open Questions for Investors

– Will the Synaptics acquisition pay off? Investors are left to wonder if onsemi’s bold acquisition will truly unlock the touted ~$30 billion “Physical AI” market opportunity by 2030 (www.onsemi.com) (www.onsemi.com). Can the company successfully cross-sell Synaptics’ edge-computing and connectivity solutions into onsemi’s automotive and industrial customer base? Or will the culture clash and different end-market focus limit the deal’s benefits? The timeline to see results is long – at least 2–3 years for EPS accretion (www.onsemi.com) – so this question will linger. In the meantime, management’s execution in integrating Synaptics (hitting the $200 million synergy target (www.onsemi.com), retaining key talent, and stabilizing Synaptics’ core business) will be closely scrutinized each quarter.

– How will the Pomerantz investigation and other legal issues resolve? A open question is whether the current shareholder unrest will escalate. If Pomerantz or other firms file a class-action lawsuit over the Synaptics deal, it could potentially lead to a court battle or settlement. Outcomes could range from no action (if the investigation finds no serious wrongdoing) to a costly settlement or corporate governance changes if a case proceeds. Separately, the existing class action related to 2023’s LTSA disclosures is ongoing (zlk.com) – its resolution (perhaps in late 2026 or 2027) could result in financial damages or at least reveal more about onsemi’s internal communications during that period. Investors should question whether these legal distractions might force management to be more conservative in guidance and less aggressive in strategic moves for a while. An open question is whether onsemi’s board will adjust oversight or strategy in response to shareholder criticism – for example, slowing the pace of acquisitions or improving disclosure around major decisions.

– Is onsemi’s growth trajectory back on track? After the 2022–2023 semiconductor cycle swings and the 2025 reset, investors are looking for evidence that onsemi is back to a stable growth path. Recent signs are encouraging – Q1 2026 revenue grew to $1.51 billion with improving margins (www.sec.gov), and management stated the company has passed the cyclical trough with strengthening demand in automotive and AI data center segments (www.sec.gov). The open question is how robust and sustainable this upturn is. Will EV-related chip sales reaccelerate strongly in the next few years, or has competition and customer caution permanently moderated growth? Can onsemi achieve its longer-term target margins now that it has restructured (gross margin was 38.5% in Q1 2026, still below the 45%+ peak in 2022 (www.sec.gov) (www.sec.gov))? Clarity on these will emerge with upcoming earnings reports. Additionally, how will Synaptics’ performance influence onsemi’s results? If Synaptics (which had been experiencing headwinds in consumer IoT) continues to struggle, it could drag onsemi’s consolidated growth. On the other hand, if onsemi can energize Synaptics’ sales through its larger channels, that would validate the acquisition. This leads to the next question:

– Will onsemi adjust its capital allocation or strategy post-deal? After spending $7 billion in stock on Synaptics, will onsemi pause further large acquisitions to digest this one? The company had a history of M&A (even a $6.9 billion unsolicited bid for Allegro Micro in 2025) (investor.onsemi.com), so investors are curious if management’s appetite is sated or if more deals could be on the horizon (potentially a risk if they pursue another transformative deal before integrating Synaptics). Moreover, with share count rising from the Synaptics dilution, onsemi might accelerate buybacks to offset some of that – can it maintain aggressive repurchases while also investing in Synaptics’ integration and its own capacity expansion (e.g. new SiC fabs)? The balance between growth investment and shareholder returns will be an open question. If onsemi’s free cash flow improves markedly by 2027, will the company initiate a dividend at last, as some investors have called for, or stick strictly to buybacks? Management’s upcoming capital allocation signals – possibly at the 2026 Analyst Day and in 2027 guidance – will help answer these questions.

– Has investor confidence been shaken long term? Finally, a broader question is whether the events of the past year have fundamentally changed how investors view onsemi. The stock currently trades at a discount to its 2021 highs in valuation terms, arguably due to the trust deficit from guidance missteps and the latest dilution. If onsemi executes well (hitting targets, no more negative surprises), trust can be rebuilt, and the market may reward it with a higher earnings multiple reflecting its growth story. However, if there are further hiccups – be it integration issues, missed forecasts, or new controversies – onsemi could be “re-rated” as a riskier proposition. Investors are effectively waiting for proof: Will onsemi deliver consistent results to match its bold pronouncements? Until that is evident, the stock may remain volatile. This uncertainty is both a challenge and an opportunity: a challenge because it elevates the risk premium on ON shares, and an opportunity because successful dispelling of these doubts could lead to significant upside. How management addresses open questions in the coming quarters – through transparency, meeting commitments, and balancing ambition with execution – will determine the fate of ON investors’ confidence.

Sources: Bloomberg, Company SEC filings, onsemi Investor Relations, Press releases, TheStreet (www.prnewswire.com) (www.sec.gov) (investor.onsemi.com) (www.onsemi.com) (www.thestreet.com) (legalclarity.org) (legalclarity.org). (All data and events as of July 2026.)

For informational purposes only; not investment advice.