Ford will sell Rivian as soon as IPO lockup expires. Q4 Earning Call. via /r/wallstreetbets #stocks #wallstreetbets #investing

Ford will sell Rivian as soon as IPO lockup expires. Q4 Earning Call.

  1. Rivian is treated as “marketable securities” on Ford’s balance sheet, as opposed to “long term investments”. This means Ford has no intentions to hold Rivian for the long haul. In fact on slide 20 of Ford’s Q4 Earnings presentation, it categorize its Rivian holdings worth $10.6B as “Liquidity”. We know a company’s liquidity needs to be reliable and readily available in time of need. Holding Rivian shares is not the best way to maintain this liquidity.
  2. During the earning call, analyst from JPM asked about what Ford will do with its high cash balance at $36.5B and whether Ford will sell its Rivian stake. Company said there are opportunities for acquisitions in the EV supply-chain. Given current elevated valuations for EV-related targets, Ford will certainly need to put up cash in the billions for a potential acquisition. More the reason it will sell Rivian shares to generate cash.
  3. Also the company flat out ignored the analyst’s question about its Rivian stake and immediately moved on to the next question. If Ford is confident in its Rivian investment, it will surely comment positively on any future collaborations or Rivian’s long-term prospects. It didn’t. By ignoring the question, the company is saying its answer to the first half the question also applies to its Rivian stake, i.e. need to use cash for acquisition.

Ford owns around 100M shares ($10.6B/$103.69 on 12/31/2021) or 11% of total shares outstanding, imagine if they come out and say they will sell Rivian when lockup expires in May 2022, this overhang will scare current holders into selling before then driving down the value of its Rivian stake. (The $10.6B stake already dropped to $6.6B since the end of last year.)

Positions: Various Jun22 Put Spreads

Earning call link:

Submitted February 04, 2022 at 05:19AM by ultddr
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