The news hit the wire Monday that Rivian Inc. (NASDAQ: RIVN) wants to end a relationship that forces it to sell all its trucks exclusively to Amazon.com Inc. (NASDAQ: AMZN). Amazon owns 17% of Rivian as part of a larger strategic relationship. Amazon should use the new conversations to dump all its Rivan shares. Rivan has very little chance of being a winner in the electric truck industry and may not even survive. (Click here for 17 terrible investments by Amazon.)
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A new deal with Rivian would open a window to sell trucks to other commercial customers. That assumes that there are any who would risk buying inventory from an electric vehicle company with substantial financial difficulties.
Amazon’s 17% of Rivian is worth $2 billion, if the ownership is unrestricted common stock. Rivian trades at $14 a share and is dropping, against a 52-high of $56.76. Amazon could have done much better, but at least it does not face a loss on its investment. Amazon would need to act quickly, however. The news made Rivian’s stock sell off another 6%.
Why is a deal once so important to both companies in trouble now? Few know, but for Amazon’s part, it is a fortunate break.
Rivian has gone through two rounds of layoffs as it has bled cash. It recently announced a $1.3 billion “green bond,” which appears to be nothing more than a way to raise needed cash.
Rivian has been dogged by bad news. It produced little more than 10,000 vehicles in the fourth quarter. Last year, Rivian lost $6.8 billion on revenue of $1.7 billion. It had $11.6 billion in cash at the end of the year, which many think is too little to get the company to break even.
The Amazon deal with Rivian was done in what, in the information age, was eons ago. Things have changed radically for both companies. It is time for Amazon to get out, including with its investment.
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