Rivian Automotive (NASDAQ:RIVN) shares are down more than 14% in Monday’s pre-market trading. The electric vehicle (EV) maker’s stock price is falling on the news that Ford (NYSE:F) is selling eight million of the 102 million Rivian shares it owns. Some speculation suggests Amazon (NASDAQ:AMZN) — which holds approximately 158 million shares (18%) — could also be selling some of its holdings. If you own AMZN stock, I wouldn’t worry about any share sales in the coming weeks.
Amazon selling Rivian shares makes sense for several reasons. Perhaps the most obvious is that it’s a significant drag on earnings, not to mention a total distraction from the positive aspects of its business here in 2022.
AMZN Stock at Lowest Point in 2 Years
Not only is Amazon trading near a 52-week low, but it’s also basically at the same level as it was in May 2020. In fact, if you go back to its September 2018 high of around $2,000, it has gained just 13% over the past 43 months. That’s not the Amazon performance most investors have known and loved. Far from it.
Amazon reported its first-quarter results on April 28. Its operating profit dropped by 59% to $3.67 billion, with a pre-tax loss of $5.27 billion during the first quarter, considerably less than the $10.27 billion pre-tax profit a year earlier. The company’s equity in Rivian lost $7.6 billion during the first quarter due to Rivian’s falling share price. If not for the change in valuation, it would have had a pre-tax profit rather than a pre-tax loss.
Rivian Has Become a Distraction
Rather than investors talking about the good things that happened during the first quarter — a 37% increase in its Amazon Web Services (AWS) sales and 23% jump in advertising revenue — they’re talking about the major drag Rivian is on the company’s financials.
There was a time when I thought Amazon might buy Rivian outright — but given Ford’s decision not to co-develop an EV with Rivian, Amazon doesn’t need to own the business to exert maximum pressure on it. Amazon’s 18% interest in Rivian is valued at less than 1% of the company’s $1.12 trillion market capitalization despite the decline in its share over the past six weeks.
From where I sit, Rivian has become a distraction for Amazon. It makes total sense for it to be unloading some of its shares. It has better fish to fry. That is not good news if you’re a Rivian shareholder.
On the date of publication, Will Ashworth 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.
