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New York
CNN Business
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In the days following its IPO in November, electric truck maker Rivian has become one of the world’s most valuable automakers despite never having reported a single sale. But its stock has continued to slide ever since, resulting in just a big loss for…..Ford?
Yes, that’s right. Ford (F), which has been making cars and trucks for more than a century and has actually sold more electric vehicles than Rivian, reported just one loss due to a slide in Rivian stock.
You see Ford, along with Amazon (AMZN), was an early backer of Rivian, which was founded in 2009 and went public last year. Ford invested $500 million in the startup company in April 2019, when the two companies announced plans to develop electric trucks together. Those plans never came to fruition, but Ford kept its investment in the area.
And despite the stock sliding over the past five months, it’s probably glad it did.
Rivian’s IPO in November was a huge hit, raising $12 billion for the company in the largest public offering since Facebook’s debut in 2012. Everyone wanted to know what Tesla ( TSLA ) could be next, and thought all of them that Rivian could be a company to do this. Shares doubled in the first week of trading, making it more valuable than any automaker on the planet except for Tesla ( TSLA ) and Toyota ( TM ).
Then reality set in.
A few weeks later, Ford and Rivian announced they would not work together on a truck, sending Rivian shares tumbling as much as 17% in a single day. In December it announced plans for a second factory, but it also reported that initial sales of its electric pickup fell short of expectations. The company’s shares continued their post-IPO decline, falling 10% on the day.
By the end of 2021, Rivian’s shares were 40% lower than their previous close the week after the IPO. However, it is worth about $92 billion, or about $10 billion more than Ford itself is worth. That means Ford’s initial $500 million investment in Rivian will be worth $10.6 billion. And so Ford reported a gain on that investment of $9.1 billion for the year.
Rivian’s shares continued to fall as supply chain problems made investors wary of any automaker not named Tesla, whether they make either electric or gas powered vehicles.
So far this year, Rivian shares are down 70% through Wednesday’s close. So on Wednesday afternoon, Ford announced that it took a $5.4 billion pre-tax charge related to its investment in Rivian, which lost nearly half of its value over the course of the first quarter.
And that resulted in Ford reporting a $3.1 billion net loss. It would have had a $1.6 billion profit without special charges.
That $1.6 billion in revenue, excluding special items, was slightly better than Wall Street forecasts, although it was down 44% from what it reported on that basis last year. Auto revenue of $32.1 billion was down 4%, although it beat forecasts by about $1 billion.
As was the case throughout the auto industry, Ford’s supply chain problems, such as a shortage of computer chips, limited the number of cars it could produce and sell. In fact, it had 53,000 vehicles at the end of the quarter that were mostly completed but awaiting installation of components affected by the semiconductor supply shortage. On Wednesday, Ford CEO Jim Farley described the results as “mixed.”
“The appeal of our new products is really clear, and customer demand is so strong that it exceeds the supply constraint of our industry,” Farley said on a call with investors. supply chain issues preventing us from posting an even stronger quarter.”
On Wall Street, fearing the worst, investors shrugged off Ford’s charge for Rivian and focused on its better-than-expected results. And so Ford shares rose more than 1% in after-hours trading.
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