Amazon Takes Massive Losses as a Result of Its Investment in EV Startup Company Rivian

Rivian Automotive Inc. and Fisker, now find themselves battling for survival amidst a storm of financial woes and market challenges, casting a shadow over the future of the once-promising EV sector. Both companies have seen their stock prices plummet and their financial stability called into question, raising concerns about the long-term viability of the EV sector as a whole.

Rivian, which had a highly anticipated IPO in November 2021 with a valuation of around $77 billion, has seen its market capitalization shrink to just $9.9 billion following a disappointing earnings report last week.

The company’s major corporate investors, including Inc. and Ford Motor Co., have suffered significant losses as a result. Amazon, which holds a 16.6% stake in Rivian, saw the value of its investment drop by nearly $1 billion last week alone, while Ford lost over $65 million on its remaining 1.15% stake.

Analysts have begun to downgrade Rivian’s stock, with Truist’s Jordan Levy slashing his price target by 58% and expressing concern over the company’s “imminent capital needs.” The planned shutdown of Rivian’s manufacturing facilities to upgrade production is expected to have a more severe impact on output than initially anticipated, further compounding the company’s woes.

Meanwhile, Fisker finds itself on the brink of collapse, having turned to restructuring advisers FTI Consulting and the law firm Davis Polk to guide them through the process of a potential bankruptcy filing.

The company admitted in a recent regulatory filing that it risked running out of cash before the end of the year, casting “substantial doubt” on its ability to continue operations. This revelation accompanied a disappointing financial report, which showed $273 million in sales for the previous year, dwarfed by a staggering $1 billion in debt.

Fisker’s founder and CEO, Henrik Fisker, has been scrambling to secure additional investment and has reportedly been in talks with potential U.S.-based manufacturing partners in an attempt to keep the company afloat. However, the market’s reaction to the news of Fisker’s hiring of restructuring firms was swift and unforgiving, with shares of the company plummeting more than 46% in after-hours trading on Wednesday.

The struggles faced by Rivian and Fisker are emblematic of the challenges encountered by many EV startups that emerged at the beginning of the decade, riding the wave of enthusiasm generated by Tesla’s success.

These companies, many of which made their market debuts through special-purpose acquisition companies (SPACs), have struggled to adapt to the recent slowdown in demand for electric vehicles.