Rivian’s shares have plummeted more than 90% since its record-breaking IPO in 2021, dropping to $14.50 at the time of writing. This move places Rivian stock firmly within the beaten-down, previous high-flying category of EV companies out there.
Rivian’s downfall is considerable, for several reasons. Of course, there are investors who lost a significant chunk of change on this name in recent years.
However, there’s also the possibility that more forced selling could be ahead, with reports that this decline could lead to Rivian stock being pushed out of the Nasdaq 100.
If that’s the case, then index funds might sell this position and buy whichever stock replaces Rivian. That is not good for existing shareholders.
That said, is this removal risk real? Let’s discuss.
This also marked one of the largest IPOs for a US company since Facebook in 2012. With an initial valuation of over $100 billion, the excitement propelled Rivian’s stock price to exceed $170 per share within a week.
Unfortunately, since then, the stock has been in a relentless downward trend.
Rivian stock has struggled despite significant production growth, with the company seeing its unit sales increase from 1,000 EVs in 2021 to 24,337 in the following year. T
he Federal Reserve’s shift from supporting the economy to combatting inflation led to a sharp increase in interest rates, the fastest in over 40 years.
As a result, unprofitable growth companies, including EV stocks like Rivian, faced significant declines as investors sought safer investments.
What Will a Nasdaq Move Mean for Rivian Stock?
Rivian stock, with a weight of less than 0.1% in the index, is expected to be removed from the Nasdaq 100 by the third Friday in June, according to JPMorgan analyst Min Moon. This could add to the stock’s decline of roughly 20% this year.
It would be a move that would certainly garner a lot of attention, for practical and symbolic purposes.
Rivian’s shares tumbled shortly after its successful IPO, facing the backlash of a broader investor sentiment shift and the impact of rising interest rates on the sales of premium electric vehicles.
If Rivian loses its position in the Nasdaq, it would be another setback for the company. Despite reaffirming its production target, investors are concerned about the market conditions, with Rivian facing higher production costs and rising interest rates. This uncertainty has made investors hesitant to invest in the company.
Rivian stock has certainly suffered a downward spiral since its IPO in November 2021 (which also was near the peak in the overall market).
As the hype around electric vehicles waned and investors expected the Federal Reserve’s actions to combat inflation, Rivian’s shares have faltered. This potential removal from the Nasdaq 100 index would be yet another setback for the company, which may be the last straw for some investors. I can understand that.
Personally, I think Rivian’s product lineup, its revenue growth prospects and vehicle segment (light trucks) make for the most compelling option in the EV space right now.
But this potential headwind on the horizon could be a thorn for many investors. Those looking to trade the stock may want to position to the downside, and for long-term investors seeking long exposure, perhaps being patient makes the most sense.
I’d be looking to get in late-June or early-July, once this headwind is out of the way.
On the date of publication, Chris MacDonald has a position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.