Door panels for the R1T, Rivian’s electric pickup truck, are ready for installation on the trim line.
Courtesy Rivian
Rivian Automotive investors have been dealing with a lot lately. Something else is coming down the pike. The initial public offering lockup ends in early May, potentially putting millions of shares on the market. That sounds scary, but it might turn out better than investors expect.
Rivian sold shares to the public in its initial public offering at a price of $78 a share on Nov. 9. An IPO lockup, which bars some early investors from selling stock for a period, ends on May 9.
That’s 180 days after the IPO, the typical period in which early investors and corporate insiders are prohibited from selling stock following the deal.
Roughly 800 million shares are affected by the lockup expiration. Lockups, and their expiration, are a normal part of IPOs. Not all that stock will be sold or traded. But investors will be paying particular attention to Amazon.com (ticker: AZMN) and Ford Motor (F) — two early investors in Rivian.
Ford owns about 100 million Rivian shares. Amazon owns almost 160 million. The firms didn’t respond to a request for comment about plans for their Rivian holdings.
The fear, for shareholders, is that large blocks of stock can drive down the price. An IPO lockup expiration, however, isn’t always that bad for a stock. Rivian stock closed Friday at $30.24, down 71% from the IPO price.
Meta Platforms (FB) had a large IPO in 2012. Its stock was also trading below its IPO price when the lockup expiration arrived. Meta, then known as Facebook, sold shares in its IPO at $38 a piece. They were about $20 a piece when the lockup expired. Shares dropped about 6% the week coming into lock up expiration, but Meta stock was about 40% higher a month after expiration.
Uber Technologies (UBER) is an example of a large transportation-related IPO. Uber sold shares for $45 apiece in 2019. The stock was about $28 when the lockup expired. Shares dropped about 14% the week coming into the lockup expiration, but Uber stock was up about 2% a month after expiration.
A Meta-like reaction is the hope for Rivian shareholders. Rivian stock is down about 83% from its November 52-week high of almost $180 a share.
Investors have sold speculative growth stocks amid rising interest rates. Rivian has also run into some speed bumps. The company plans to delivery roughly 25,000 vehicles in 2022. At the start of the year, Wall Street was looking for closer to 40,000.
Rivian’s lockup expiration could turn into a positive catalyst. The stock market is forward-looking, so the lockup expiration could already be price in.
Some short-sellers cover after an event like a lockup expiration. About 6% of Rivian’s total shares outstanding have been borrowed and sold by short-sellers betting on price declines. The average short-selling ratio for an S&P 500 company is closer to 2%. If some of the Rivian short-sellers buy shares to cover their positions, that could boost the stock in the short-run.
Write to Al Root at [email protected]
