Electric truck starting sections
fell on Monday.
is the main reason, but there is something else that bothers investors.
Just look at the whole market. It all ended the day lower, including shares of early Rivian (ticker: RIVN), investor Ford (F) and
Ford is a big part of the problem for Rivian on Monday. The carmaker plans to sell 8 million of Rivian’s roughly 100 million shares held by the company, according to several reports. Ford was the first investor in Rivian, and a blockade of stock sales by insiders following Rivian’s initial public offering in November ends Monday. Ford declined to comment on a potential sale.
Amazon has expressed confidence in the carmaker. “Rivian is an important partner for Amazon, and we are excited about the future,” a spokeswoman said in a statement sent by email. “Putting 100,000 electric vans on the road by 2030 is no small feat, and we remain committed to working with Rivian to make it a reality.”
Rivian shares fell 21% on Monday. The news that a large block of stocks is coming to the markets may reduce all stocks. Overall market sentiment also did not help Rivian shares. The
Dow Jones industry average
it closed 3.2% and 2% lower, continuing a serious sell-off in recent days.
Coming to trading on Monday, shares of Riviana fell more than 14% last Thursday and Friday. S&P 500 i
it fell by 4.1% and 6.3%, respectively, in the same period.
(TSLA) shares fell 9.1% in the last two days last week. Tesla shares fell 9.1 percent to $ 787.
It’s just not a great market for potentially disruptive high-growth stocks. Rising interest rates and inflation have dampened investor enthusiasm for speculative ideas.
Growth stocks generate most of their earnings far in the future. Higher rates make that earnings worth less in today’s dollars when it goes back down. The impact on growth stocks is more significant than for companies that are not expanding as fast as they are expected to achieve a higher share of the profits of high-growth companies over the next few years.
The impact of rates on valuation math is one reason why high-growth stocks fare worse than others in difficult markets. There are other reasons. First, high-rise stocks are usually highly valued, so they have to fall further when investors get scared.
Amazon is trading as growth stocks, with 53-times estimated earnings in 2022. Shares fell about 4 percent on Monday afternoon, largely due to concerns about rising interest rates rather than a fall in Rivian shares.
Amazon owns about 160 million shares of Rivian shares, but even a double-digit percentage drop in startup shares as of Monday has had little effect on its $ 1.5 trillion market capitalization. The decline in the value of Amazon’s Rivian shares amounts to approximately $ 700 million, or less than 0.1% of Amazon’s total market capitalization.
Ford’s market capitalization is far smaller, about $ 57 billion, but the decline in the value of its Rivian shares is still small relative to the size of the company. Shares of Ford fell 5.3% on Monday afternoon.
Ford’s fall on Monday erases market value by approximately $ 3 billion. The fall in stakes in Rivian is about $ 500 million.
Ford is not traded as growth stocks. The stock is reaching about seven times the estimated earnings of 2022. Nothing in the market – neither stocks with growth nor the value of stocks – has risen recently.
Write to Al Root at [email protected]