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Ford Owns Lots of Rivian Stock. Why Its Shares Are Slipping Anyway.

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Ford Motor Company’s chief executive officer Jim Farley poses next to the newly unveiled electric F-150 Lightning outside of their headquarters in Dearborn, Michigan on May 19, 2021.

Jeff Kowalsky/AFP via Getty Images

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Moves in shares of


Ford Motor
,
compared with


Rivian Automotive

stock, are curious—to say the least.


Ford

(ticker: F) owns roughly 100 million shares of


Rivian

(RIVN). And Ford’s stake has been increasing in value as Rivian’s share price has exploded. Coming into Wednesday’s trading session, Rivian stock was up more than 120% since its initial public offering on Nov. 10.

Ford stock, however, is down over the same span, by about 2%. The

S&P 500
is flat and the

Dow Jones Industrial Average
has fallen by 1%. Excluding the value of Rivian, Ford’s market capitalization has diminished by about 17% since the IPO.

Three factors may be behind the steep drop. First, the market might be saying that Ford’s business will be significantly harmed by the emergence of Rivian. That is possible, but Rivian existed, and represented a threat, before the IPO. In any case, Ford isn’t going quietly into the night. It will start selling its own all-electric truck in 2022, alongside the Rivian R1T truck.

A second possibility is that the market might not be paying attention to the paradoxical move in Ford stock. That is also unlikely based on feedback from readers that Barron’s receives. People are watching the prices of both car makers closely.

That leaves the third theory, that investors holding Rivian stock are growth investors, while the people holding and trading Ford stock are likely focused on value. The two groups may not agree about valuations on a daily basis.

That is the argument Barron’s believes is most likely to be right.

Rivian stock is down for the first time since its IPO. Shares closed down about 15.1%. Ford stock rose 0.9%. The drop in Rivian removes roughly $2.5 billion from the value of Ford’s stake, but Ford’s market capitalization rose by almost $1 billion.

Go figure.

Write to Al Root at [email protected]

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