Ford Might Have Very Bad News for Rivian

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The first quarter was very tough for Rivian  (RIVN) – Get Rivian Automotive, Inc. Class A Report and its shareholders. 

The latter saw the value of their stake melt away as shares of the upstart tumbled due to investor concerns about its ability to handle production rate increases, a PR crisis born of clumsiness linked to an increase in vehicle prices. Added to this were disruptions to supply chains and soaring raw material prices. In the end, the bill is steep for investors.

At the beginning of March, the company had said that the Normal, Ill., factory had capacity to produce 50,000 vehicles in 2022, but due to supply-chain difficulties, Rivian would manufacture only half that number — 25,000.

These operational difficulties are reflected on the stock market, as Rivian shares have slumped 72.2% this year. The market capitalization at Rivian has shrunk by $66.1 billion, to $25.43 billion from Dec. 31 to May 6. 

Rivian shares lost 52% — more than half — of their value from Dec. 31 through March 31, which represents the first quarter. 

Heavy Losses Due to Rivian

Ford  (F) – Get Ford Motor Company Report, like the e-commerce giant Amazon  (AMZN) – Get Amazon.com, Inc. Report, is a shareholder of Rivian. Therefore, it is no surprise that the shares of Amazon and Ford in Rivian have also been hit.

Amazon owned 17.74% of Rivian as of Dec. 31 and Ford owned 11.42%, according to documents filed with the Securities and Exchange Commission.

“We reported an overall net loss of $3.8 billion in the first quarter,” Brian Olsavsky, Amazon’s chief financial officer, told analysts on April 29 during the first-quarter-earnings call.  “While we primarily focus our comments on operating income, I’d point out that this net loss includes a pre-tax valuation loss of $7.6 billion included in non-operating expense from our common-stock investment in Rivian Automotive.”

This impairment contrasts with the fourth quarter of 2021, when Amazon’s stake in Rivian gave the e-commerce giant a $12 billion gain.

Ford, for its part, posted a net loss of $3.1 billion from January to March. 

“A net loss of $3.1 billion was primarily attributable to a mark-to-market loss of $5.4 billion on the company’s investment in Rivian. Adjusted earnings before interest and taxes were $2.3 billion,” Ford said.

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Ford’s stake in Rivian was valued at $5.1 billion on March 31, down more than half from $10.6 billion at the end of 2021, the company said. 

Ford Reportedly Plans to Sell 8 Million Rivian Shares

Ford would have decided to limit the damage. Indeed, according to CNBC’s David Faber, the Dearborn automaker has decided to sell 8 million of its 102 million Rivian shares at the end of the 180-day lockup period which ends on May 8. The sale will be made via the investment bank Goldman Sachs. 

The lockup is a period during which the initial investors of a company which goes public cannot sell their shares to avoid flooding the market.

Contacted by The Street, Ford said it would not comment.

“As we near the, I think, 180-day lockup expiry on your investment in Rivian, how are you thinking about the options available to you in terms of this investment going forward?” J.P Morgan analyst Ryan Brinkman asked Ford’s CEO Jim Farley during the first-quarter earnings’ call.

“Are you maybe more inclined to retain some or all of the stake given the recent decline in Rivian shares?”

“Unfortunately at this point, we’re not going to comment on Rivian,” Farley responded.

Amazon has not yet said whether it intends to keep all Rivian shares. 

The group is in a special situation because it is both a customer and a shareholder of Rivian. Ford is a shareholder and rival of Rivian.

Rivian was founded in 2009 and went public in 2021. From its factory in Normal, the carmaker produces three vehicles: the R1T electric pickup, the R1S electric SUV, and the RCV electric commercial van. 

The R1T is one of the main rivals of the F-150 Lightning, the electric version of the F-150 pickup.