KEY POINTS
- Rivian shares lost over half their value in the first quarter of 2022, forcing Amazon to take a big markdown on its stake in the electric vehicle company.
- On Wednesday, Ford took a $5.4 billion loss on its Rivian stake.
- Amazon invested more than $1.3 billion in Rivian as part of strategic partnership between the two companies.
Amazon invested in electric vehicle maker Rivian in 2019 as part of a plan to go green. During the first quarter, it saw nothing but red.
In its earnings report on Thursday, Amazon took a $7.6 billion loss on its stake in Rivian. Shares of the EV manufacturer plummeted by more than 50% in the first three months of 2022, reversing course from the fourth quarter, when the company held its stock market debut and saw its value skyrocket.
While Amazon has big ambitions for Rivian, signing an agreement for the production of 100,000 delivery vehicles by 2030, current market conditions are rough. Rivian said last month that the company expects to produce just 25,000 electric trucks and SUVs this year, half of the number forecast to investors last year as part of its IPO roadshow.
Like most manufacturers, Rivian is battling through supply chain constraints and internal production snags. But Rivian was valued at $86 billion after its IPO pop, making the stock particularly vulnerable to a major pullback.
The Nasdaq Composite dropped 9.1% in the first quarter, its worst period since the first quarter of 2020, when the Covid-19 pandemic was beginning. The riskiest bets took the biggest hits as investors rotated into assets considered safer in a period of rising inflation and interest rates.
Rivian’s drop has continued into the second quarter, with the stock plummetting another 36%. It’s now more than 80% off its high from November.
On Wednesday, Ford took a $5.4 billion loss on its 12% stake in Rivian. Amazon has a roughly 18% stake, according to FactSet, investing a total of more than $1.3 billion into the company.
Amazon’s markdown is particularly large, but it’s not the only tech company that’s taking a beating on its equity investments.
Earlier this week, Alphabet recorded a $1.07 billion loss on its investments “given market volatility.” Alphabet’s investment arms have backed companies including UiPath, Freshworks, Lyft and Duolingo, which have all gotten caught up in the market swoon.
Microsoft said this week that its first–quarter profit took a $174 million hit in part due to “mark-to-market losses on our equity portfolio.” And last week Snap said it had a $92 million unrealized loss “on investment that became public in H2 2021.”
Source: www.cnbc.com