Please ensure Javascript is enabled for purposes of website accessibility

Why Rivian Stock Crashed Today

By Joe Tenebruso – Nov 17, 2021 at 5:41PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors decided to take some profits off the table.

What happened

Shares of Rivian Automotive (RIVN 13.16%) fell 15% on Wednesday, marking the electric vehicle maker's first negative daily performance since its initial public offering (IPO) on Nov. 10.

So what

Rivian tore out of the gates, with its shares soaring as much as 130% above its $78 IPO price. The blockbuster debut quickly made Rivian the third-most valuable automaker in the world, behind only Tesla and Toyota

But once the excitement surrounding its IPO began to die down a bit, investors began to question whether Rivian was really worth the roughly $150 billion its stock was valued at as recently as Tuesday. Judging by the sharp decline in its share price today, many investors decided that Rivian had come too far, too fast.

A person is pointing to a stock chart that rises sharply and then falls.

Rivian Automotive's stock price pulled back on Wednesday. Image source: Getty Images.

Now what

Rivian's shares are likely to remain volatile as the market attempts to assign a proper value to its nascent business. That valuation will be a difficult endeavor for investors.

Rivian is full of potential. It operates in the booming electric vehicle industry. It's also backed by (AMZN 2.66%) and Ford, whose support should make Rivian's success far more likely. In fact, Amazon has already ordered 100,000 vehicles from Rivian to help the e-commerce titan transition its massive delivery fleet to renewable power sources. 

However, Rivian has yet to produce much in the way of revenue. It's also slated to burn through billions of dollars in cash as it ramps its manufacturing capacity. And we don't know what Rivian's profit margins will look like when it begins to deliver vehicles to customers.

With so much uncertainty, shareholders should brace for a wild ride in the coming days.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso has the following options: long January 2023 $2,400 calls on Amazon. The Motley Fool owns shares of and recommends Amazon and Tesla. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.