Both Amazon and Ford reported quarterly profit losses this week, citing their investments in Rivian Automotive.
Amazon on Thursday reported a rare quarterly loss of $3.84 billion, due entirely to a $7.6 billion loss in the value of its stock investment in Rivian Automotive. Same with Ford, which said it lost $5.5 billion on its Rivian holdings in the quarter, prompting it to report a total loss of $3.1 billion.
Why would a publicly hidden startup cause headaches for such US business giants?
What is Rivian?
Rivian Automotive is an electric truck manufacturer that owns a former Mitsubishi plant in Normal, Illinois.
It was founded by RJ Scaringe, who earned his Ph.D. from the Massachusetts Institute of Technology in 2009. In 2011, Scaringe scrapped plans to build a coupe, signaling the auto industry’s shift to pickups.
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Why did Ford and Amazon invest?
Rivian’s promise and Scaringe’s vision and connections have always attracted big investors. Scaringe’s connections at MIT linked him to the Jameel family of Saudi Arabia who, along with other investors, helped the company raise $450 million.
After a flash truck revealed that even attracted singer Rihanna In conjunction with the Los Angeles Auto Show in November 2018, Amazon announced in February 2019 that it would lead a $700 million investment in the company. that April, Ford said it was investing $500 million.
Ford was interested in battery development and at one point planned to co-develop a pickup truck, but this latter plan was scrapped. Amazon has ordered 100,000 electric delivery vans.
Once thought to be a potential Tesla competitor, Rivian’s other investors include big names like Vanguard, T. Rowe Price and Blackrock.
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What caused the loss?
Rivian remained a tech and automotive darling as it made a initial public offering in November 2021. The share price reached a high of $172.01 on November 16. At the end of the year, it dropped to $103.69.
But in March this year, Rivian said that supply chain problems had drastically reduced its production and that it could make only 25,000 vehicles this year. He said he had only placed 1,410 so far in 2022, compared to 83,000 orders, not counting Amazon.
The shares fell, closing the first quarter at $50.24. Amazon and Ford lost about half the value of their investment in one quarter.
What is the perspective?
Shareholders, and indirectly investors in Ford and Amazon, cannot expect quick change. Amid all the economic headwinds, Rivian shares continue to slide, closing Thursday at $32.18.
Randy Essex is an editor on the USA TODAY Money team: [email protected]; @randyessex on Twitter. Sign up for our free Daily Money newsletter for personal finance tips and business news Monday through Friday mornings.
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