What happened

It's becoming near impossible to catch the bottom in Rivian Automotive (RIVN 0.34%) stock. After a double-digit drop in March, Rivian shares tanked another 39.8% last month, according to data provided by S&P Global Market Intelligence.

The electric vehicle (EV) stock isn't done just yet -- it's down a gaping 16% in May as of 10:06 a.m. ET. And it may have further to fall.

So what

Rivian has spent much of recent weeks warning investors about the several challenges facing the company.

In March, Rivian said it expects to produce only 25,000 vehicles this year versus the 50,000 units it could have produced if not for a shortage in semiconductor chips. Then in April, The Wall Street Journal reported that Rivian CEO RJ Scaringe believes a shortage in battery supply will be an even bigger threat to the auto industry than the chip shortage that's been going on for nearly two years now. Scaringe even called that shortage "a small appetizer" to what could happen with battery cells over the next couple of decades.

Rivian R1T pickup truck.

Image source: Rivian Automotive.

With these warnings coming barely weeks ahead of Rivian's earnings release, investors were spooked, more so after Rivian revealed earlier in the month that it had delivered only 1,227 vehicles in the first quarter against a production of 2,553 vehicles.

These warnings, numbers, and low earnings expectations unsurprisingly triggered a flurry of stock downgrades on Rivian, including from:

  • Mizuho analyst Vijay Rakesh, who cut the stock's price target to $90 per share from $95 per share.
  • Piper Sandler analyst Alexander Potter, who cut Rivian's price target to $112 per share from $130 per share.
  • Barclays analyst Brian Johnson, who cut Rivian's price target to $38 per share from $42 per share.

In between, two of Rivian's largest shareholders, Ford (F -0.41%) and Amazon (AMZN -1.11%), reported massive losses on account of a dramatic drop in the value of their investments in Rivian in the first quarter.

Of course, Ford's and Amazon's losses shouldn't have affected Rivian shareholders, but they triggered strong fears of what many believed was an inevitable event: These shareholders dumping their shares in Rivian upon the expiration of the 180-day initial public offering (IPO) lockup period.

The IPO lockup period for Rivian's early investors expired yesterday on May 9, and Rivian shares are already getting pummeled.

Now what

CNBC reported this past weekend that Ford plans to sell 8 million shares in Rivian once the IPO lockup period expires. CNBC also claimed another unknown seller is planning to sell 13 million to 15 million shares in Rivian, priced at $26.90 per share.

These are massive blocks of stocks, and dumping shares at such a large scale is bound to create heavy selling pressure on Rivian -- like the pressure we're seeing this morning. But here's the thing: Ford owned roughly 102 million shares in Rivian and Amazon nearly 160 million as of last count. If these companies dump these shares even in tranches, there's little that could stop Rivian shares from sinking further.

And let's not forget Rivian's upcoming earnings release on May 11, expectations for which are already abysmally low.