While it seems like bad news, remember that even the CEO can sell shares for many reasons.
Rivian Automotive (RIVN -0.10%) arguably exited 2023 with more momentum than any electric vehicle (EV) start-up. The company’s stock surged 40% this past December on investors’ high hopes — only then to drop 53% so far this year. To say it’s been a bit of a roller-coaster ride for Rivian and other EV makers would be an understatement.
More recently, Rivian CEO RJ Scaringe made a move that could give some investors pause. Let’s assess what this could all mean — or not — for the stock and its outlook.
CEO dumps shares
Rivian CEO RJ Scaringe recently made a move that likely will get investors’ attention. Scaringe sold 71,429 shares of the company on June 10 for a value of roughly $821,000. While this action could raise eyebrows, it serves as a good reminder to investors that people can sell stocks for many reasons that aren’t solely based on losing faith in the company.
For example, Scaringe may have sold the stock after it hit a near-term price target. Rivian stock rebounded over 18% between May 10 and June 10, when Scaringe made the sale. It’s also possible he wanted to diversify his holdings or for tax purposes or for any number of reasons.
Meanwhile, Rivian received a vote of confidence from Adam Jonas, Morgan Stanley’s auto analyst. Jonas met with Rivian management in May and said the EV maker is “uniquely positioned within autos (other than Tesla) on scaling a fully integrated software stack critical to unlock the AI opportunity.”
Rather than focus on the CEO’s recent move, investors would be wise to focus on the company’s recent move to refresh its current platform of R1 vehicles and the upcoming launch of the R2 crossover in 2026.
Lower costs, better margins
While the company’s unveiling of the R2 and previously unheard-of R3 stole the headlines, just as important to Rivian’s near term is the refresh of its R1 vehicles. The updated R1 vehicles boast new motor configurations, hundreds of hardware improvements, and premium trim options that are expected to lower costs and improve margins.
More specifically, Rivian introduced two entirely new premium Ascend trim packages, a new Storm Blue paint option, and blackout trim options. These premium trims are typically associated with higher price tags and fatter margins. The new generation of R1 vehicles will reduce the number of component parts, including producing motors that are designed and fully manufactured in-house, and reduce manufacturing costs.
These moves to reduce costs and provide higher-margin trim options will be key to Rivian becoming gross profit-positive as it expects in 2024, with production and deliveries forecast to remain flat compared to the prior year.
What it all means
Ultimately, for Rivian investors, 2026 and its more competitively priced R2 crossover can’t come soon enough. Management has already decided to pull initial production of the R2 to its original factory rather than wait for completion of its next plant in Georgia, saving the company $2.25 billion and accelerating the launch schedule.
Rather than focus on the CEO selling shares, it would be wise to focus on how the company is making production and manufacturing adjustments to become gross profit-positive — an important step on its long-term journey to becoming profitable.
Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
