Rivian stock

[rbstern]

Profit? You think Ford made a profit on Rivian stock?

https://fordauthority.com/2022/04/ford-has-lost-5-4-billion-on-its-rivian-investment/

As the story describes, Ford put $500 million into Rivian. At its peak, the stake was worth $12 billion when Rivian went public, so Ford put it on their books at that value, and took the one time tax charge because it was favorable at the time. It's also the responsible way to account for the asset, since a publicly stock traded is worth what the market says it is worth, versus a private stock, which is harder to value.

Rivian stock price dropped quite a bit, to the point where Ford's position was worth about $6.5 billion. Because Ford had already booked the profit on paper, it's an accounting loss, and they had the benefit of offsetting profits and paying less tax. The timing was actually very favorable relative to how the pandemic played havoc on the auto business. Kudos to Ford management for getting that right.

The cash reality: Ford put $500 million into Rivian, and it returned more than twelvefold that amount in cash. They are distributing that cash as a one time dividend.

The headline is a classic clickbait/gloom-and-doom type press article designed to convince people Ford is somehow worse off.

$500 million went out. $6.5 billion came back. They're giving the cash to the owners of the company. They used the paper loss to offset some profits and reduce their tax bill.

That sound bad to you? Still see it the same way?

 

[Lionheart]

If those are the facts...no. Unless you consider that at one point Ford had an asset worth 12 billion

As the story describes, Ford put $500 million into Rivian. At its peak, the stake was worth $12 billion when Rivian went public, so Ford put it on their books at that value, and took the one time tax charge because it was favorable at the time. It's also the responsible way to account for the asset, since a publicly stock traded is worth what the market says it is worth, versus a private stock, which is harder to value.

Rivian stock price dropped quite a bit, to the point where Ford's position was worth about $6.5 billion. Because Ford had already booked the profit on paper, it's an accounting loss, and they had the benefit of offsetting profits and paying less tax. The timing was actually very favorable relative to how the pandemic played havoc on the auto business. Kudos to Ford management for getting that right.

The cash reality: Ford put $500 million into Rivian, and it returned more than twelvefold that amount in cash. They are distributing that cash as a one time dividend.

The headline is a classic clickbait/gloom-and-doom type press article designed to convince people Ford is somehow worse off.

$500 million went out. $6.5 billion came back. They're giving the cash to the owners of the company. They used the paper loss to offset some profits and reduce their tax bill.

That sound bad to you? Still see it the same way?

So an investment worth 12 billion was sold for 6.5 billion.
Sounds like good management to me.

 

[rbstern]

If those are the facts...no. Unless you consider that at one point Ford had an asset worth 12 billion

So an investment worth 12 billion was sold for 6.5 billion.
Sounds like good management to me.

Or, you can say an investment bought for $500 million was sold for $6.5 billion. Shareholders who bought the IPO and still holding are currently at a 75% haircut.

Ford got a 1300% cash return, and booked a paper loss to reduce the taxes on their regular business profits.

Which position would you rather be in?

And, before you say "Well, they didn't sell at $12 billion, so they're losers," that high water mark was never attainable. First, I don't know whether they had IPO sales restrictions, as many private holders do. There is often a period where private holders can't sell IPO shares.

Second, had Ford tried to aggressively sell at Rivian's peak, they would have driven the price down. They've been selling gradually throughout the time of the IPO until now.

 

[Buckeye Mike]

Wanted to revisit this thread, because there is some potential tailwind for Rivian stock:

Ford declared a special dividend yesterday. Reason: They've nearly unwound their entire Rivian position, and they are essentially giving the profit they made on the investment to their shareholders.

Ford has been steadily selling what originally amounted to 10% stake in Rivian. Now that they are just about finished, it means the selling pressure (and downward price pressure) they've applied is just about over.

All things being equal (which they never are), Rivian stock price may start to drift up a bit, without that regular but abnormal selling going on.

If you're holding Rivian shares, this may help. If you were on the fence about buying, this might be a reason to get off the fence.

I wouldn't bet my lunch money, but a small position might be worth the risk.

I’ve been buying for the last 6 months or so. Been averaging down. Amazon still holds a big stake in rivian. This is at least a 5 year investment for me.

 

[Buckeye Mike]

Or, you can say an investment bought for $500 million was sold for $6.5 billion. Shareholders who bought the IPO and still holding are currently at a 75% haircut.

Ford got a 1300% cash return, and booked a paper loss to reduce the taxes on their regular business profits.

Which position would you rather be in?

And, before you say "Well, they didn't sell at $12 billion, so they're losers," that high water mark was never attainable. First, I don't know whether they had IPO sales restrictions, as many private holders do. There is often a period where private holders can't sell IPO shares.

Second, had Ford tried to aggressively sell at Rivian's peak, they would have driven the price down. They've been selling gradually throughout the time of the IPO until now.

Some people just don’t want to understand. They believe everything EV is bad. Myself, I like money and believe this is a good risk at my average price. I didn’t buy in at the IPO.

 

[GFB]

I’ve been buying for the last 6 months or so. Been averaging down. Amazon still holds a big stake in rivian. This is at least a 5 year investment for me.

I figured in 10 years it will either be a penny stock or much higher than it is currently. Definitely speculative from my amateur point of view. Everyone is guessing what earnings might look like years from now, but that’s the nature of things.

 

[GaMudd]

I just don't see Rivian being a player. IF (big if) I was going to buy an electric truck, I'd probably go to whatever legacy ICE builder that I have been buying my entire life. I just don't see a Ford or GM (or whatever your favorite flavor is) customer jumping to Rivian.
Just my thoughts.

 

[Lionheart]

I just don’t like Rivian. Period. Their owner/founder is a real fruitcake and talks about the business like it is a Disney adventure.
Plus they are building their GA plant on top of a very environmentally sensitive groundwater recharge zone for the local aquifer...where all the locals wells draw from.
So not only are they California liberal assholes...they are hypocrites.

 

[GFB]

I just don’t like Rivian. Period. Their owner/founder is a real fruitcake and talks about the business like it is a Disney adventure.
Plus they are building their GA plant on top of a very environmentally sensitive groundwater recharge zone for the local aquifer...where all the locals wells draw from.
So not only are they California liberal assholes...they are hypocrites.

That's probably all true but where is the price per share moving? I feel zero pity for people living outside Atlanta who already made their money and don't care about job growth. People need good jobs. If you live in the metro area and there's growth, too bad. I want the whole state to keep growing. That's why most people move here. The only difference between Alabama and Georgia is the government got out of the way of business first here.

 

[savannahboy]

That's probably all true but where is the price per share moving? I feel zero pity for people living outside Atlanta who already made their money and don't care about job growth. People need good jobs. If you live in the metro area and there's growth, too bad. I want the whole state to keep growing. That's why most people move here. The only difference between Alabama and Georgia is the government got out of the way of business first here.

You may not care for quality of life in a rural area but some of us do. You sound like a shill for Kemp. Greed and uncontrolled growth is a poison.