Rivian Automotive falls again, maybe because
Ford Motor and the electric truck start-up said late Friday that they will not be developing electric vehicles together. However, not everyone is convinced that this is the reason: Even
Tesla, and hoping it could split its shares could be a factor.
While the S&P 500 and the Dow Jones Industrial Average both rose about 0.7% around noon Monday,
Rivian (ticker:RIVN) shares fell about 15% to $108.50. That leaves it just under $2 above the $106.75 level where the stock began trading on Nov. 10 upon its public market debut.
Rivian was able to recoup some of the losses and closed 8.2% at $118.11. The S&P closed 0.3% lower. The Dow was flat in the day.
Rivian sold shares for $78 on November 9, but most investors didn’t get those bargain shares. That price was paid by investors, mainly institutions, who were allocated shares by brokers who conducted the IPO process.
Almost all open-air profits are gone. Friday’s news that Ford and Rivian won’t co-develop electric vehicles could be behind Monday’s loss, but the shares may also have lost ground simply because they’ve been incredibly volatile since IPO.
Friday’s gain of 4.2% in Rivian shares was the smallest daily move, up or down, since the IPO.
A third reason for Monday’s weakness appears to be Tesla (TSLA). Nicolas Colas of Data Trek Research wrote shortly after Rivian’s IPO that money could flow out of Tesla stock and into Rivian stock. He saw investors sell some of their stake in Tesla to buy Rivian, which was seen as potentially the next big thing.
The money flow theory seems to hold some water. Six of the nine days that Rivian has been trading, the two stocks have moved in opposite directions. Tesla shares rose when Rivian fell and fell when Rivian won.
And Tesla shares were up 4.6% in afternoon trading. That jump in Tesla added about $50 billion in market cap to the EV leader’s stock. The peak drop in Rivian removed about $20 billion worth of EV perfumer’s worth.
Tesla shares closed 1.7% higher at $1,156.87 on Monday.
Money came back into Tesla after CEO Elon Musk tweeted that Tesla could sell the Model S Plaid Edition — the company’s fastest car — in China by March 2022.
However, investors may be looking for more from Tesla than that. The seemingly arbitrary idea that the company could split its shares again is gaining ground. Gary Black, manager of the
Future Fund Active ETF
(FFND), for example, believes there will be a split.
The phasing out of Elon Musk’s stock sale and new Tesla capacity coming online in Texas and Germany could also be behind earnings, Black said.
Tesla has not responded to a request for comment about splits.
In the long run, both stocks could work if Rivian matches Tesla’s success, even to a much smaller extent, by taking a share of the EV market. But whether Rivian can sell hundreds of thousands of EVs per year is not yet known.
Write to Al Root at firstname.lastname@example.org