Canthoney

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Can anyone explain the financial implications for this? It looks like Rivian stock is up after-hours slightly:

Ford Motor Co. expects to record a gain of $8.2 billion in the fourth quarter on its investment in Rivian Automotive Inc. after the electric-truck maker’s blockbuster initial public offering late last year.

The legacy automaker disclosed the gain Tuesday along with several special items it intends to report when Ford releases earnings on Feb. 3. The Dearborn, Michigan-based company will also reclassify a noncash gain of about $900 million on the Rivian investment from the first quarter of last year as a special item, meaning it will be excluded from the full-year adjusted results, according to a statement.

The disclosures show Ford continues to gain from its connection to the startup even after the auto giant exited Rivian’s board in September and subsequently announced it had abandoned plans to jointly develop an electric vehicle. Ford, which has invested a total of $1.2 billion in Rivian since early 2019, has a 12% stake that the company has said was valued at more than $10 billion in early December.

Since a November listing that was the largest IPO of 2021, Rivian has been on a roller coaster. The shares peaked at more than $172, but have tumbled 57% since then as the company faced new competition in the electric-vehicle market. Rivian was briefly valued at more than $100 billion, then more valuable than Ford, but Ford has subsequently reclaimed the lead after it topped $100 billion in value for the first time last week.

Ford shares were little changed in after-hours trading Tuesday in New York, while Rivian climbed less than 1%.”

 

Craigins

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immediate term? none. Ford has a bit for the 180 day lockout window before they can dump their Rivian holdings. I've seen a few articles saying Ford should dump their position and use it to finance their own EV ventures. Essentially a wait and see. If Rivian starts overdelivering and the price has an upward trend I wouldn't dump unless Ford needed the capital.
 
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Canthoney

Canthoney

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immediate term? none. Ford has a bit for the 180 day lockout window before they can dump their Rivian holdings. I've seen a few articles saying Ford should dump their position and use it to finance their own EV ventures. Essentially a wait and see. If Rivian starts overdelivering and the price has an upward trend I wouldn't dump unless Ford needed the capital.
That’s what I was wondering, I knew the lock-out was still in effect, and from all indications it looks like Ford will divest to plow into their own development. At least I think that’s what everyone is predicting they will do, so I’m watching closely after that time to buy some more shares
 

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Well, I mean, Ford only has something like $130 Billion worth of debt on its books. So they could sell the entirety of Rivian twice over and still not be out of the hole :).
 

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Not investment advice, just my layman's understanding:

In the near term - it's only news at the moment because a public company (Ford) is going to have to recognize the "book gain" on it's investment (in this case in another public company) as it prepares to close out the fiscal year and report Q4 and full-year financials. Everyone can calculate this and knows Ford will recognize this in their financials. Other companies also have to recognize mark-to-market value of side-investments. Investors need to know what is an effect of the direct business, vs. impacts from other investments that aren't part of the core operation. This is mechanical process for the year end that lots of companies that have investments in other businesses would have. The news should mean nothing to Rivian's stock price as nothing is changing about Rivian's business, it's just bookkeeping for Ford.

Longer term folks are trying to guess whether Ford is backing out the door on the Rivian relationship, or if we just misunderstood it in the first place. Aside from co-developing an SUV which DID seem to chill, Ford could still want to be invested longer-term for other reasons and future opportunities. Depending on how we view that longer term, AND once the lock-up period ends, some think Ford rushing to sell its block of RIVN could push the price down. I'd think Ford wouldn't want to damage their own position and if RIVN is doing well by then, the net-effect might be little if anything
 
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DuckTruck

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Well, I mean, Ford only has something like $130 Billion worth of debt on its books. So they could sell the entirety of Rivian twice over and still not be out of the hole :).
While they may have a ton of debt on their books, most reports show they had somewhere in the neighborhood of $35 billion in cash on hand late last year. I'm guessing their debt is at a fairly low rate, so I'd be surprised if they need the cash anytime soon.

I'm hoping they hang on to the stock as a good investment, but I have yet to get a call from them asking for my advice. ?‍♂
 

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While they may have a ton of debt on their books, most reports show they had somewhere in the neighborhood of $35 billion in cash on hand late last year. I'm guessing their debt is at a fairly low rate, so I'd be surprised if they need the cash anytime soon.

I'm hoping they hang on to the stock as a good investment, but I have yet to get a call from them asking for my advice. ?‍♂
You were probably on the phone with your guide when they called…;)
 

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Last month, I was this with another forum member. They pointed out that Ford doesn't have to sell the stock at all. They can simply use it as collateral for a loan.

Also, I'm not knowledgeable on this, but does Ford have to keep the stock for at least one year to avoid higher capital gains taxes?
 

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Last month, I was this with another forum member. They pointed out that Ford doesn't have to sell the stock at all. They can simply use it as collateral for a loan.

Also, I'm not knowledgeable on this, but does Ford have to keep the stock for at least one year to avoid higher capital gains taxes?
Yes, but most, if not all, of their investment was made more than a year ago in private rounds.

Even if it were the best thing to do financially, I can't see Ford holding on to the shares long term. The optics of holding a large stake in a competing manufacturer wouldn't sit well with shareholders. If they ever had to raise capital, the first question would be why don't you just sell your Rivian stock, why are you coming to me for money? And again, while perhaps a smart strategic move, holding it as a hedge doesn't scream confidence in yourself. Investors will say, I'm investing in Ford, if I wanted Rivian I'd invest in Rivian. By holding the stake, Ford would be saying, we believe Rivian will deliver higher returns on capital than reinvesting that money in our business, not a good look (even if it were true).
 

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All of this means wait until June to buy RIVN. Either it will keep going down like this and Ford will decide it is too low to sell in which case it will still be a low enough to buy or it will bounce and Ford will sell at a good price and push it back down for us to buy. Check back in June.

On the other hand, it will be summer time and a lot of you may be off-road in your Rivians having too much fun to worry about stocks.
 

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The thing that kills me is that Lucid has a higher market cap than Rivian right now. And Lucid keeps recovering.
 

 
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