Tesla competitor Rivian shares tank 19% as Ford sells part of its stake

Posted: 9 May 2022 4:20 pm
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Early backer Ford sells 8 million shares, deepening investor worries on EV startup’s outlook. Will you buy or is a 77% decline from its IPO price too scary?

Tesla (TSLA) competitor Rivian Automotive (RIVN) saw its stock tumble 19% on Monday after CNBC reported that part-owner Ford Motor is selling 8 million shares of the electric vehicle startup.
Monday’s slump further slashes the value of the Rivian investment held by Amazon (AMZN). The online retail giant, another early backer, has already booked a $7.6 billion hit in its first-quarter results as a ramification of the decline in the EV startup’s shares.
That brought Rivian shares to a new low below $23, down from $100 a share price when Rivian started trading in November and the $179 peak that month. Everyday investors who bought what was a hot IPO might also be wondering if they should hold on.

Lockup period ending

Ford (F), which owns about 12% of Rivian, isn’t the only stockholder offloading part of its stake. JPMorgan Chase also plans to sell a share block of between 13 million and 15 million for an unknown seller, CNBC reported, citing sources it didn’t identify.
These major Rivian stockholders are paring their holdings after the expiration of the lockup period that prevents them from selling their shares. Lockup periods are typically set to ensure holders don’t flood the market with shares during the company’s initial public offering.

The share sale adds to concerns that have shaken investor confidence in the stock. Raw material shortages have plagued the electric vehicle maker. In its fourth-quarter results, Rivian said it expects to produce 25,000 vehicles in 2022, just half of about 50,000 vehicles it forecast last year during its IPO roadshow, as it grapples with supply chain issues, according to CNBC.

Should you invest in Rivian today?

They say fortune favors the brave. But just how brave are you to buy or hold a stock that’s seeing a major selloff? The stock has crashed 77% since it started trading in November.
CFRA cut its price target on Rivian to $25 from $40, the streetinsider.com reported, without citing the reason. CFRA maintained its hold rating on the stock, according to the report.
Despite the slump, Rivian is still rated a buy by 11 of 16 analysts on Yahoo Finance’s website, with their average target price seen at $79.43. That represents a huge upside for a stock that traded at $23.25 at 2:47 p.m. ET Monday in New York.
If you’re considering taking advantage of the slump, see our guide on how to buy Rivian stock.

Amazon’s $7.6 billion hit

Major early investors who poured money into Rivian are already feeling the pinch. When Amazon reported its first-quarter results in late April, the online retailer said it booked a $7.6 billion loss from its stock investment in Rivian. That’s a stark reversal from the $11.8 billion in valuation gain that the retailer reported in its fourth-quarter results from its investment in the EV maker.
Amazon invested in Rivian as part of the retailer’s effort to reduce carbon emissions by switching away from fossil-fueled vehicles. The online retail giant ordered 100,000 electric delivery vehicles from the EV startup in 2019 and expects all the vehicles to be deployed by 2030.

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At the time of publication, Luzi Ann Javier doesn’t own shares of Tesla, Rivian or Ford. She does, however, own Amazon shares.

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