Ford (F) picked a tough time to pare its stake in Rivian.
Financial markets are sinking. Growth concerns are mounting and investor mistrust of growth groups is high.
It is in this context that the Dearborn, Mich., auto giant decided to sell 8 million of its 102 million Rivian (RIVN) shares. According to CNBC's David Faber, the sale of those shares. led by Goldman Sachs, was made at a price of $26.90.
In addition to Ford, JPMorgan Chase also plans to sell 13 million to 15 million Rivian shares at the same price on behalf of an unidentified seller.
Contacted by TheStreet, Ford declined to comment.
The decision of the group led by Chief Executive Jim Farley is not really a surprise because it comes at the end of a 180-day lockup period. That's the time during which the initial investors of a company that goes public cannot sell their shares to avoid flooding the market.
Amazon Remains 'Committed'
The sale of Rivian shares weighed on the stock. Rivian shares at last check were down around 17% at around $24. This year, Rivian shares have dropped more than 76%. Rivian's market capitalization has shrunk by almost $70 billion to $21.91 billion from Dec. 31.
Rivian declined to comment because it's in a quiet period. The company will report its first-quarter earnings on May 11. Investors are hoping for an update on how the company is managing the ongoing supply chain issues.
The sale of shares by Ford does not seem like a sign of lack of confidence in the future of Rivian. After all, the legacy carmaker retains 94 million Rivian shares. Ford sold only about 8% of its shares.
But Rivian seems to be a collateral victim of the current run of share liquidations, especially those of groups whose market capitalizations are currently based more on promises than on their performance and dividends paid.
Besides Ford, which owned 11.42% of Rivian as of Dec. 31, Amazon is also another major shareholder in the company, with 17.74% of Rivian as of December 31.
"Rivian is an important partner for Amazon, and we are excited about the future," a spokesperson said in an emailed statement. "Putting 100,000 electric delivery vehicles on the road by 2030 is no small feat, and we remain committed to working with Rivian to make it a reality.”
The value of Ford and Amazon's stakes in Rivian fell sharply in the first quarter, causing financial losses to both companies.
"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."
Supply Chain
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.
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.
Rivian shares lost 52% -- more than half -- of their value in the first quarter.
Rivian was founded in 2009 and went public in 2021. From its factory in Normal, Ill, the carmaker produces three vehicles: the R1T electric pickup, the R1S electric SUV, and the RCV electric commercial van.
The company, which is in the process of increasing production rates, cooled off investors in March by lowering its production target to 25,000 vehicles for 2022. The Normal plant has production capacity of 50,000 units.
Rivian attributed the revision to problems in its supply chain. Suppliers are hindered by restrictions linked to the covid-19 pandemic as well as by the increase in the price of raw materials and the shortage of chips.
