Ford is planning to sell 8 million of the roughly 100 million shares of Rivian the company holds, according to multiple reports.
Courtesy Rivian
Shares of electric-truck startup Rivian Automotive were falling early Monday. Ford Motor is the main reason, but there is something else troubling investors.
Just look at the overall market. Everything is lower, including shares of early Rivian (ticker: RIVN) investors Ford (F) and Amazon.com (AMZN).
Ford is a big part of the problem for Rivian on Monday. The auto maker is planning to sell 8 million of the roughly 100 million shares of Rivian the company holds, according to multiple reports. Ford was an early investor in Rivian and the lockup on insider shares sales following Rivian’s initial public offering in November ends Monday. Ford declined to comment on the potential sale.
Rivian stock was down more than 9% in premarket trading. News that a large block of stock is hitting the markets can send any stock lower. Overall market sentiment isn’t helping Rivian shares either. S&P 500 and Dow Jones Industrial Average futures were about 1.8% and 1.5%, respectively, continuing the severe selloff of recent days.
Rivian shares dropped more than 14% over this past Thursday and Friday amid a broad market selloff. The S&P 500 and Nasdaq Composite fell 4.1% and 6.3%, respectively, over the same span.
Tesla (TSLA) stock dropped 9.1% on the final two days of the past week. Tesla shares were down another 3.7% in premarket trading to about $833.
It just isn’t a great market for more disruptive, high-growth stocks. Rising interest rates and inflation have sapped some investor enthusiasm for more speculative ideas.
Growth stocks generate most of their earnings far in the future. Higher rates make those earnings worth less in today’s dollars when discounted back. The impact on growth stocks is more significant compared with slower growing companies that generate significant earnings today.
The impact of rates on valuation math is one reason high-growth stocks fair worse than others in bear-like markets. There are other reasons. For one, high-growth stocks tend to be highly valued and the prospect of slowing economic growth combined with rising investor fear mean growth stocks simply have farther to fall.
Amazon trades like a growth stock. Shares trade for 53 times estimated 2022 earnings. Shares were down about 2.9% in premarket trading. The rates and growth factors are more important than the Rivian factor in its Monday decline.
Amazon owns about 160 million shares of Rivian. The 9%-plus decline in Rivian shares removes roughly $400 million of value from Amazon’s stake. That is about 0.03% of Amazon’s $1.5 trillion market capitalization.
Ford’s market cap is about $57 billion. The Monday decline in Ford’s Rivian stock holdings amounts to about 0.4% of its capitalization. Ford stock fell about 2.5% in premarket trading Monday.
Ford doesn’t trade like a growth stock. Shares fetch about seven times estimated 2022 earnings. Nothing in the market — growth or value — has worked recently.
Write to Al Root at [email protected]
