The year 2022 was a nightmare for the shareholders of the upstart electric-vehicle maker Rivian.
The stock fell 82.2%, which translated to $75.3 billion wiped out.
Many retail investors have seen their stock investments deteriorate. And for institutional investors, the Rivian (RIVN) bet has also turned disastrous.
Rivian went public in November 2021, and the stock then rose as high as $180, which was clearly gold for early shareholders like e-commerce giant Amazon (AMZN) and automaker Ford. (F)
Moreover, in 2021, their interests in the manufacturer of the R1T electric pickup had helped boost their profits.
But Rivian's missteps and self-inflicted wounds last year completely changed the narrative around the firm.
For example, at the end of February, the company raised prices on its R1T electric pickup truck, by 17%, and its R1S SUV, by 20%, due to higher materials costs and chip shortages. But it applied the increases to all customers, both new and those who had already placed their orders.
In the face of an outcry and cancellations, the CEO at the time, RJ Scaringe, apologized. "We wrongly decided to make these changes apply to all future deliveries, including preexisting configured preorders," he said.
To this must be added the continued pandemic-related supply-chain disruptions, which have caused the automobile group's costs to soar.
This cocktail has complicated Rivian's effort to mass-produce its vehicles.
Ford Sold Most of Its Rivian Shares
Now, some investors have lost patience. Ford, the Dearborn, Mich., auto-production stalwart, has sold almost all its stake in Rivian.
Ford (F) sold 3.8 million shares of Rivian in the fourth quarter. In all of 2022, the company, which initially held 101.9 million Rivian shares, or 12% of the capital, sold 91 million Rivian shares, according to regulatory filings. Ford now owns only 11 million Rivian shares.
The Dearborn group made a good deal but could have won more. Here's how:
Ford had invested $1.2 billion in Rivian. The sale of the 91 million Rivian shares netted the company $3 billion, a gain of $1.8 billion. But given the surge in Rivian stock in the first months after its IPO, Ford could have sold at even higher prices -- but the stock market crash last year thwarted Ford's plans.
"The monetization of our Rivian stake ... is now nearly complete," Chief Executive Jim Farley told analysts during the fourth-quarter-earnings call on Feb. 2.
Ford seems in a hurry to turn the Rivian page it opened in 2019. At the time the two automakers envisaged that the legacy carmaker would manufacture a vehicle on the Rivian's Skateboard platform. That's the base on which Rivian's R1S SUV is being developed.
But these plans never materialized.
Ford began to withdraw from Rivian last May, selling 25.2 million shares for $700 million, according to regulatory filings. The company then sold 51.9 million shares in the third quarter for $1.8 billion.
Rivian
Amazon Stands Pat on Rivian
This change in strategy came after the stake in Rivian began to prompt impairment charges on Ford's balance sheet.
"We recorded $12.2 billion of pretax special-item charges in 2022, driven by a $7.4 billion mark-to-market net loss on our Rivian investment and a $2.7 billion impairment on our Argo investment," Ford explained in its last annual report.
Argo refers to Argo AI, a subsidiary developing autonomous technologies, of which Volkswagen (VLKAF) was also a major shareholder. Last October, Ford decided to withdraw its support to the firm, which was then forced to close.
Even if Rivian is about to lose Ford, the Irvine, Calif., automaker can still count on Amazon (AMZN).
The e-commerce giant has not sold Rivian shares, even as the value of its stake in Rivian has lost ground. In the fourth quarter, for example, the pretax loss linked to its Rivian's holdings was $2.3 billion. In Q4 2021, Amazon had recorded a pretax gain of $11.8 billion linked to its stake in Rivian.
Amazon held a 17.34% stake in Rivian as of Dec. 30, according to FactSet.
The partnership between the two companies also extends to a commercial relationship, while Ford is Rivian's rival. Amazon has placed a gigantic order for the EDV, the commercial van developed by Rivian.
The upstart currently produces the R1S SUV, the R1T pickup/truck and the EDV van, all at its Normal, Ill., plant.
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