This week has brought one of the most highly anticipated IPOs (initial public offerings) of the season as Rivian Automotive (NASDAQ:RIVN) begins trading. The EV (electric vehicle) innovator saw pre-orders surge as news of its impending public debut heated up. Since trading began, RIVN stock has been surging. The historic IPO was one of the largest of any U.S. companies, with a market capitalization big enough to rival the debut of much larger competitors Ford Motor Company (NYSE:F) or General Motors (NYSE:GM). As it turns out, though, Ford isn’t just an industry peer — it has direct ties to its new rival.
What Is the Rivian-Ford Connection?
As is the case with any popular startup, investors should be taking careful note of Rivian’s backers. This list includes some very high profile names, including Amazon (NASDAQ:AMZN) and T.Rowe Price (NASDAQ:TROW), which hold stakes of 22.4% and 18.8%, respectively. It doesn’t stop there, though. Ford also saw potential in its developing competitor and holds a 14.4% stake. As InvestorPlace‘s Eddie Pan notes, “It seems the company has its eyes set on the future of transportation, and electric vehicles certainly fit that description.”
According to Securities and Exchange Commission (SEC) filings, Ford’s interest in Rivian dates back to 2019 and consists primarily of equity and bond investments. So far, it’s proving to have been an excellent investment decision.
When markets closed yesterday, RIVN stock stood at $100.73 per share, putting Ford’s stake at roughly $10.3 billion. Today it’s even higher, as shares are currently trading at over $116 per share. That’s an increase of 16% for the day so far. The initial purchase was for $820 million. Definitely not a bad return on investment so far.
The Road Ahead
To anticipate your next question, yes, Ford does have its own line of EVs. The automotive giant was one of the first companies to embrace the hybrid vehicle trend, and it plans on building three battery factories and a truck plant to keep pace with the steep demand for electric cars and trucks throughout the coming year. There was never a question as to whether Ford was going to be left behind as the EV revolution overtook the automotive industry, but there’s definitely been some questions regarding how established industry players will fare when competing against trendy new startups such as Lucid Motors (NASDAQ:LCID), Nio (NYSE:NIO) and, as of this week, Rivian.
As Pan also noted, this type of strategic investment indicates that Ford saw significant potential in Rivian. Like Ford, Rivian has helped establish itself in the EV market by producing electric trucks. This is a section of the market that isn’t being as quickly saturated as four-dour passenger sedans.
There have been some questions around how long Ford will maintain its investor status. It’s safe to say, though, that for as long as Rivian continues to trade well, Ford will be most incentivized to maintain its position.
RIVN Stock Is Just Taking Off
While we’re used to competition driving markets, companies profiting from the success of their competitors is a strange, new trend. Keeping its stake in Rivian allows Ford to do exactly that, though. As of now, Ford is clearly happy with its investment. CEO Jim Farley recently tweeted his congratulations to Rivian, stating “Our industry and planet will benefit from the shift to EVs.”
While Rivian acknowledged in its SEC filing that Ford’s investment could ultimately lead to a conflict of interest, it does not seem too worried about it in the short term. RIVN stock has been performing well enough that, for now, both companies are able to sit back and enjoy the ride.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.