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Electric vehicle start-up Rivian Automotive plans to list its shares on the Nasdaq on November 10th. The company aims to trade under the ticker symbol “RIVN.”
Rivian had previously raised its expected price range to between $72 and $74, up from an initial range of $57 to $62. It priced its IPO on Tuesday at $78 a share above top of range.
According to Bloomberg, Rivian expects the IPO to bring in $11.9 billion. The $11.9 billion haul is the biggest first-time share sale this year as well as the sixth-largest ever on a U.S. exchange.
Based on the share count, Rivian is being valued at about $76.4 billion on a fully diluted basis that accounts for stock options.
Business Overview
Rivian, founded in 2009, design, develop, and manufacture category-defining electric vehicles (“EVs”) and accessories.
Rivian launched its R1T, a two-row, five-seat pickup truck, in September. It plans to launch an SUV, the R1S, in December. Wider sales of the truck and the SUV are expected to begin in December and January.
The pickup truck starts at $67,500 for a basic trim and can go 314 miles between charges. Rivian said it had 48,390 R1T and R1S preorders in the U.S. and Canada as of September.
Rivan also builds an electric delivery van for Amazon, referred to as the EDV, at the plant and has an contract to delivery 100,000 of them to the retail giant by 2025.
Like Tesla, Rivian is selling its vehicles directly to consumers, skipping dealership networks, and asking for a refundable deposit when people configure their vehicle on its website.
Rivian beat Tesla, GM and Ford to the market with an electric pickup, the R1T, which has received glowing early reviews.
Amazon and Ford Motor are among Rivian’s backers. The EV maker has raised $10.5 billion since 2019 after several investment rounds, with the latest a $2.5 billion funding round in July, led by Amazon.com’s Climate Pledge Fund, Ford, and T. Rowe Price funds, among others.
Amazon and Ford each own more than 5% of the company. Peter Krawiec, Amazon’s senior vice president of worldwide corporate and business development, sits on Rivian’s board.
Financial Performance
Perhaps not surprisingly, Rivian has never made money, and doesn’t expect to turn a profit in the “foreseeable future” as it invests in its business.
Rivian lost $426 million in 2019, and went on to lose $1 billion last year. For the first six months of this year, Rivian lost $994 million.In 2020 the company’s net loss came to $1.02 billion.
Click to view the prospectus
$Rivian Automotive (RIVN.US)$
Rivian had previously raised its expected price range to between $72 and $74, up from an initial range of $57 to $62. It priced its IPO on Tuesday at $78 a share above top of range.
According to Bloomberg, Rivian expects the IPO to bring in $11.9 billion. The $11.9 billion haul is the biggest first-time share sale this year as well as the sixth-largest ever on a U.S. exchange.
Based on the share count, Rivian is being valued at about $76.4 billion on a fully diluted basis that accounts for stock options.
Business Overview
Rivian, founded in 2009, design, develop, and manufacture category-defining electric vehicles (“EVs”) and accessories.
Rivian launched its R1T, a two-row, five-seat pickup truck, in September. It plans to launch an SUV, the R1S, in December. Wider sales of the truck and the SUV are expected to begin in December and January.
The pickup truck starts at $67,500 for a basic trim and can go 314 miles between charges. Rivian said it had 48,390 R1T and R1S preorders in the U.S. and Canada as of September.
Rivan also builds an electric delivery van for Amazon, referred to as the EDV, at the plant and has an contract to delivery 100,000 of them to the retail giant by 2025.
Like Tesla, Rivian is selling its vehicles directly to consumers, skipping dealership networks, and asking for a refundable deposit when people configure their vehicle on its website.
Rivian beat Tesla, GM and Ford to the market with an electric pickup, the R1T, which has received glowing early reviews.
Amazon and Ford Motor are among Rivian’s backers. The EV maker has raised $10.5 billion since 2019 after several investment rounds, with the latest a $2.5 billion funding round in July, led by Amazon.com’s Climate Pledge Fund, Ford, and T. Rowe Price funds, among others.
Amazon and Ford each own more than 5% of the company. Peter Krawiec, Amazon’s senior vice president of worldwide corporate and business development, sits on Rivian’s board.
Financial Performance
Perhaps not surprisingly, Rivian has never made money, and doesn’t expect to turn a profit in the “foreseeable future” as it invests in its business.
Rivian lost $426 million in 2019, and went on to lose $1 billion last year. For the first six months of this year, Rivian lost $994 million.In 2020 the company’s net loss came to $1.02 billion.
Click to view the prospectus
$Rivian Automotive (RIVN.US)$
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Did you miss the $Tesla (TSLA.US)$ IPO that offered shares at its IPO price of just $17 per share in 2010? If you're thinking of investing in the electric vehicle (EV) sector, then you must have heard of $Rivian Automotive (RIVN.US)$.
The market highly anticipates Rivian because it has been backed by $Amazon (AMZN.US)$ and $Ford Motor (F.US)$ , and dubbed as the rival of Tesla.
Yes, it's tonight! We're going to witness the IPO of Rivian, the top 10 IPOs of all time in the United States, according to data from Dealogic.
The Rivian IPO priced an upsized 153 million shares at $78 a share Tuesday night. That was above the already-raised price range of $72-$74.
The RIVN IPO raised $11.9 billion, giving Rivian an initial valuation of roughly $77 billion.
There are two interesting facts:
1. Rivian Valuation
Rivian IPO has raised its target price several times, which demonstrated the massive enthusiasm of investors on EV sectors, predominantly driven by the recent price surge of Tesla.
Generally, four factors affect the IPO valuation:demand, industry comparable, growth prospects, and a compelling corporate narrative.
For the full article: Please check at our IPO Basics Course.
2. Rivian's Financials
Rivian has yet to generate revenue and post a profit. Rivian is in the early stages of production, and until it scales output, losses are to be expected.
It had net losses of $426 million and $1 billion for 2019 and 2020, respectively. Rivian reported a loss of nearly $1 billion for the first half of the year.
Rivian is a company from a promising industry but unprofitable.The question for us: is an unprofitable company worth investing in?
You might find your answer in our Fundamental Analysis Course.
Do you think Rivian would be a stock to buy? Share your comments below with mooers.
$Lucid Group (LCID.US)$ $Nikola (NKLA.US)$
The market highly anticipates Rivian because it has been backed by $Amazon (AMZN.US)$ and $Ford Motor (F.US)$ , and dubbed as the rival of Tesla.
Yes, it's tonight! We're going to witness the IPO of Rivian, the top 10 IPOs of all time in the United States, according to data from Dealogic.
The Rivian IPO priced an upsized 153 million shares at $78 a share Tuesday night. That was above the already-raised price range of $72-$74.
The RIVN IPO raised $11.9 billion, giving Rivian an initial valuation of roughly $77 billion.
There are two interesting facts:
1. Rivian Valuation
Rivian IPO has raised its target price several times, which demonstrated the massive enthusiasm of investors on EV sectors, predominantly driven by the recent price surge of Tesla.
Generally, four factors affect the IPO valuation:demand, industry comparable, growth prospects, and a compelling corporate narrative.
For the full article: Please check at our IPO Basics Course.
2. Rivian's Financials
Rivian has yet to generate revenue and post a profit. Rivian is in the early stages of production, and until it scales output, losses are to be expected.
It had net losses of $426 million and $1 billion for 2019 and 2020, respectively. Rivian reported a loss of nearly $1 billion for the first half of the year.
Rivian is a company from a promising industry but unprofitable.The question for us: is an unprofitable company worth investing in?
You might find your answer in our Fundamental Analysis Course.
Do you think Rivian would be a stock to buy? Share your comments below with mooers.
$Lucid Group (LCID.US)$ $Nikola (NKLA.US)$
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$Rivian Automotive (RIVN.US)$ matters as it offers Americans another choice when it comes to an EV maker other than the hugely successful $Tesla (TSLA.US)$. What matters more is perhaps $Rivian Automotive (RIVN.US)$ will be the first to market an electric pick-up truck. With a headstart, an exciting vehicle and fresh capital, will that be enough for the new car company to succeed? The path to its success may not be easy as it is almost unknown and has little time for mistakes. $Rivian Automotive (RIVN.US)$ does not have the same opportunities as $Tesla (TSLA.US)$ to experiment and figure things out without the competition. Even though the contract by $Amazon (AMZN.US)$ would be the main growth catalyst, there are risks involved by depending heavily on a single customer and possible supply chain disruptions that could lead to costly delays. Investors should be prepared to brace themselves for a stomach-churning ride. For now, $Tesla (TSLA.US)$ seems to be a safer bet as its success story is not easy to replicate.
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![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined"){kind=small}
On the last trading day, the NASDAQ Composite index dropped 0.60%, while the S&P 500 index dipped 0.35%, and the Dow Jones Industrial Average declined 0.31%.
On Tuesday, there was no traditional IPO filed and four new stocks officially listed for trading. Online commerce platform Society Pass surged 436.67% in its trading debut, giving it a market value of $0.92 billion.
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Rivian and Expensify is going public today:
Electric vehicle start-up Rivian Automotive plans to list its shares on the Nasdaq on November 10th. The company aims to trade under the ticker symbol “RIVN.”
Rivian had previously raised its expected price range to between $72 and $74, up from an initial range of $57 to $62. It priced its IPO on Tuesday at $78 a share above top of range.
According to Bloomberg, Rivian expects the IPO to bring in $11.9 billion. The $11.9 billion haul is the biggest first-time share sale this year as well as the sixth-largest ever on a U.S. exchange.
Based on the share count, Rivian is being valued at about $76.4 billion on a fully diluted basis that accounts for stock options.
Related:
IPO-pedia | Amazon-backed EV maker Rivian prices its IPO above top of range
Expensify plans to list on the Nasdaq Global Market under the ticker symbol "EXFY." The company is known for its cloud software, which helps businesses manage their finances.
Expensify boosted the price range for its initial public offering. It would sell 9.73 million shares at $25 to $27 each, up from the $23 to $25 price range it set last week. At $27 a share, Expensify’s valuation is $2.18 billion.
The offering is being led by JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp.
Related:
IPO-pedia | Top-rank expense management software Expensify will go public today
Online commerce platform Society Pass acquires and operates e-commerce platforms in South Asia.
It operates its platforms through direct and indirect wholly-owned subsidiaries, including but not limited to Society Technology LLC, SoPa Technology Pte Ltd, SoPa Cognitive Analytics Pte Ltd, Sopa Technology Co Ltd, HOTTAB Pte Ltd and HOTTAB Vietnam Co Ltd, etc.
The Group currently markets to both consumers and merchants in Vietnam while maintaining an administrative headquarters in Singapore.
After the completion of IPO, it intends to expand our e-commerce ecosystem throughout the rest of SEA and South Asia with particular focuses on the Philippines, Indonesia, India and Bangladesh.
Roblox is an online game platform and game creation system developed by Roblox Corporation. It allows users to program games and play games created by other users. The platform hosts user-created games of multiple genres coded in the programming language Lua.
Created in 2004 and released in 2006, Roblox began to grow rapidly in the second half of the 2010s, and this growth has been accelerated by the COVID-19 pandemic. As of August 2020, Roblox had over 164 million monthly active users, with it being played by over half of all children aged under 16 in the United States.
As of November 10th 2021 Roblox has a market cap of $63.39 billion, with the listed to date gain of 143.38%.
$Society Pass (SOPA.US)$ $Roblox (RBLX.US)$ $Rivian Automotive (RIVN.US)$ $Expensify (EXFY.US)$
On Tuesday, there was no traditional IPO filed and four new stocks officially listed for trading. Online commerce platform Society Pass surged 436.67% in its trading debut, giving it a market value of $0.92 billion.
Electric vehicle start-up Rivian Automotive plans to list its shares on the Nasdaq on November 10th. The company aims to trade under the ticker symbol “RIVN.”
Rivian had previously raised its expected price range to between $72 and $74, up from an initial range of $57 to $62. It priced its IPO on Tuesday at $78 a share above top of range.
According to Bloomberg, Rivian expects the IPO to bring in $11.9 billion. The $11.9 billion haul is the biggest first-time share sale this year as well as the sixth-largest ever on a U.S. exchange.
Based on the share count, Rivian is being valued at about $76.4 billion on a fully diluted basis that accounts for stock options.
Related:
IPO-pedia | Amazon-backed EV maker Rivian prices its IPO above top of range
Expensify plans to list on the Nasdaq Global Market under the ticker symbol "EXFY." The company is known for its cloud software, which helps businesses manage their finances.
Expensify boosted the price range for its initial public offering. It would sell 9.73 million shares at $25 to $27 each, up from the $23 to $25 price range it set last week. At $27 a share, Expensify’s valuation is $2.18 billion.
The offering is being led by JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp.
Related:
IPO-pedia | Top-rank expense management software Expensify will go public today
Online commerce platform Society Pass acquires and operates e-commerce platforms in South Asia.
It operates its platforms through direct and indirect wholly-owned subsidiaries, including but not limited to Society Technology LLC, SoPa Technology Pte Ltd, SoPa Cognitive Analytics Pte Ltd, Sopa Technology Co Ltd, HOTTAB Pte Ltd and HOTTAB Vietnam Co Ltd, etc.
The Group currently markets to both consumers and merchants in Vietnam while maintaining an administrative headquarters in Singapore.
After the completion of IPO, it intends to expand our e-commerce ecosystem throughout the rest of SEA and South Asia with particular focuses on the Philippines, Indonesia, India and Bangladesh.
Roblox is an online game platform and game creation system developed by Roblox Corporation. It allows users to program games and play games created by other users. The platform hosts user-created games of multiple genres coded in the programming language Lua.
Created in 2004 and released in 2006, Roblox began to grow rapidly in the second half of the 2010s, and this growth has been accelerated by the COVID-19 pandemic. As of August 2020, Roblox had over 164 million monthly active users, with it being played by over half of all children aged under 16 in the United States.
As of November 10th 2021 Roblox has a market cap of $63.39 billion, with the listed to date gain of 143.38%.
$Society Pass (SOPA.US)$ $Roblox (RBLX.US)$ $Rivian Automotive (RIVN.US)$ $Expensify (EXFY.US)$
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The current stock market is giving a positive vibe and high valuation to the electric vehicle stocks regardless they have profit or not. $Tesla (TSLA.US)$ is currently the most valuable companies along with other Ev startups $Lucid Group (LCID.US)$ $NIO Inc (NIO.US)$ $XPeng (XPEV.US)$ are worth billions despite little production.
Even the other huge manufacturers $General Motors (GM.US)$ $Ford Motor (F.US)$ $Honda Motor (HMC.US)$ are even trading at a lower PE ratio. EV stocks are currently over valued than traditional automakers as we can conclude that the Ev supply is constrained. In long term, these advantages will erode and Ev makers will face same challenges as these old automakers. 🍀
Even the other huge manufacturers $General Motors (GM.US)$ $Ford Motor (F.US)$ $Honda Motor (HMC.US)$ are even trading at a lower PE ratio. EV stocks are currently over valued than traditional automakers as we can conclude that the Ev supply is constrained. In long term, these advantages will erode and Ev makers will face same challenges as these old automakers. 🍀
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$Rivian Automotive (RIVN.US)$ Incumbent automakers have found a path to profitability and earn billions of dollars in free cash flow, thanks to their scale and expertise. What critics see as their Achilles heel, that is, their investments in traditional auto manufacturing, are in fact an advantage for these incumbents. The transition to EVs will be easier for traditional automakers compared to the path to scale and profitability for pure play EV makers.
We are all familiar with Tesla’s operational struggles: The many setbacks, as well as delays, which have eased as the company has matured but are still present. Money and an idea, no matter how great the idea, are not enough to compensate for the decades of manufacturing experience and the immense scale of traditional automakers. This is the competitive advantage that traditional automakers have, which companies like Rivian and Tesla have not found a way around. Rivian has followed the same path of Tesla, delaying delivery of its flagship cars. These are not problems that get fixed in a quarter or a year. They take years to fix and in that time incumbents are expanding their EV presence. You cannot assume that Rivian will be allowed to grow and learn and in response incumbents will be twiddling their thumbs.
Rivian does not yet have the kind of brand loyalty that Tesla has. It faces a risk that further delays would turn off its ~54,000 customers. In the time that Rivian announced its delay, Ford announced that it had more than 160,000 pre-orders for its F-150 Lightning.
$Ford Motor (F.US)$ , $General Motors (GM.US)$ , and $VOLKSWAGEN AG (VLKAF.US)$ , as well as $Tesla (TSLA.US)$ , have built the infrastructure to deliver EVs at scale. All these incumbents are well funded and are deploying billions of dollars into the EV market. This means that Rivian’s path to minimum viable scale is getting narrower even before the company delivers a single EV.
We are all familiar with Tesla’s operational struggles: The many setbacks, as well as delays, which have eased as the company has matured but are still present. Money and an idea, no matter how great the idea, are not enough to compensate for the decades of manufacturing experience and the immense scale of traditional automakers. This is the competitive advantage that traditional automakers have, which companies like Rivian and Tesla have not found a way around. Rivian has followed the same path of Tesla, delaying delivery of its flagship cars. These are not problems that get fixed in a quarter or a year. They take years to fix and in that time incumbents are expanding their EV presence. You cannot assume that Rivian will be allowed to grow and learn and in response incumbents will be twiddling their thumbs.
Rivian does not yet have the kind of brand loyalty that Tesla has. It faces a risk that further delays would turn off its ~54,000 customers. In the time that Rivian announced its delay, Ford announced that it had more than 160,000 pre-orders for its F-150 Lightning.
$Ford Motor (F.US)$ , $General Motors (GM.US)$ , and $VOLKSWAGEN AG (VLKAF.US)$ , as well as $Tesla (TSLA.US)$ , have built the infrastructure to deliver EVs at scale. All these incumbents are well funded and are deploying billions of dollars into the EV market. This means that Rivian’s path to minimum viable scale is getting narrower even before the company delivers a single EV.
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$Rivian Automotive (RIVN.US)$ Many investors may get excited about Rivian’s partnerships with well-known companies like Amazon and Ford. However, when we dig into the details of these partnerships, they’re filled with hype and not much else.
$Amazon (AMZN.US)$ : In 2019 Rivian announced a partnership with Amazon Logistics Inc., (referred to in the S-1 as “Logistics”) a subsidiary of Amazon which is responsible for last-mile delivery of Amazon’s retail operations. While it's reported that Amazon has ordered 100,000 electric delivery vehicles (EDVs) from Rivian, under the terms of the agreement Amazon is under no obligation to actually purchase any vehicles. From the S-1:
“While the EDV Agreement provides that we will be reimbursed for certain development costs, it does not include any minimum purchase requirements or otherwise restrict Logistics from developing vehicles or collaborating with, or purchasing similar vehicles from, third parties.”
Additionally, Amazon Logistics has exclusive rights to purchase EDVs from Rivian for four years after the date of first vehicle delivery and a right of first refusal for an additional two years.
In other words, Rivian cannot sell EDVs to any other company for four years after delivering its first vehicle to Amazon, whether or not Amazon decides to purchase any EDVs at all. The exclusivity clause of this agreement may significantly hamper Rivian’s ability to capture market share and allow more competitors to enter the EDV market uncontested.
$Ford Motor (F.US)$ : Rivian also made headlines due to the investments from Ford, which now total nearly $800 million in Class B and D preferred stock. In 2019, Rivian entered into a purchase agreement with a Ford subsidiary, Troy Design and Manufacturing Co (referred to as TDM), for the supply of prototype and pre-production vehicles. Now that Rivian’s factory is up and running, it expects to discontinue purchases for this service from TDM.
However, Rivian is still required to purchase certain key components for its R1 vehicle program exclusively from TDM for the life of the R1 vehicle program. Details on the rest of the partnership are unclear. Ford already cancelled plans to build a Lincoln EV based on Rivian’s platform in 2020, stating that “it would be better to focus our development efforts on Lincoln’s own fully electric vehicle.” More recently, Ford executives left Rivian’s board of directors and Ford noted in a statement that “Rivian is a strategic investment and we're still exploring ways for potential collaboration with them. We don't have anything to announce today.”
While these partnerships were touted as legitimizing Rivian’s business, in reality, they look more like arms-length equity investments by Amazon and Ford. In its latest 10-Q, Amazon reported a 20% ownership interest in Rivian. In many respects, these partnerships hinder Rivian’s growth and cost model more than they help the company.
$Amazon (AMZN.US)$ : In 2019 Rivian announced a partnership with Amazon Logistics Inc., (referred to in the S-1 as “Logistics”) a subsidiary of Amazon which is responsible for last-mile delivery of Amazon’s retail operations. While it's reported that Amazon has ordered 100,000 electric delivery vehicles (EDVs) from Rivian, under the terms of the agreement Amazon is under no obligation to actually purchase any vehicles. From the S-1:
“While the EDV Agreement provides that we will be reimbursed for certain development costs, it does not include any minimum purchase requirements or otherwise restrict Logistics from developing vehicles or collaborating with, or purchasing similar vehicles from, third parties.”
Additionally, Amazon Logistics has exclusive rights to purchase EDVs from Rivian for four years after the date of first vehicle delivery and a right of first refusal for an additional two years.
In other words, Rivian cannot sell EDVs to any other company for four years after delivering its first vehicle to Amazon, whether or not Amazon decides to purchase any EDVs at all. The exclusivity clause of this agreement may significantly hamper Rivian’s ability to capture market share and allow more competitors to enter the EDV market uncontested.
$Ford Motor (F.US)$ : Rivian also made headlines due to the investments from Ford, which now total nearly $800 million in Class B and D preferred stock. In 2019, Rivian entered into a purchase agreement with a Ford subsidiary, Troy Design and Manufacturing Co (referred to as TDM), for the supply of prototype and pre-production vehicles. Now that Rivian’s factory is up and running, it expects to discontinue purchases for this service from TDM.
However, Rivian is still required to purchase certain key components for its R1 vehicle program exclusively from TDM for the life of the R1 vehicle program. Details on the rest of the partnership are unclear. Ford already cancelled plans to build a Lincoln EV based on Rivian’s platform in 2020, stating that “it would be better to focus our development efforts on Lincoln’s own fully electric vehicle.” More recently, Ford executives left Rivian’s board of directors and Ford noted in a statement that “Rivian is a strategic investment and we're still exploring ways for potential collaboration with them. We don't have anything to announce today.”
While these partnerships were touted as legitimizing Rivian’s business, in reality, they look more like arms-length equity investments by Amazon and Ford. In its latest 10-Q, Amazon reported a 20% ownership interest in Rivian. In many respects, these partnerships hinder Rivian’s growth and cost model more than they help the company.
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$Ford Motor (F.US)$ and $Amazon (AMZN.US)$ , two of $Rivian Automotive (RIVN.US)$ notable early investors, with the latter having that initial 100,000 unit order expected to be fulfilled over the next four years. A 10,000 unit fulfillment goal by the end of 2022 requires rapid scaling of production, as does the remaining ~90,000 units over the three following years. Although Rivian's success over the next few years hinges substantially on that single order, these two backers have already seen those investments pay off.
Ford's 103 million share stake in Rivian, which cost around $1.2 billion in total, is worth around $10 billion as of close, or eight times return; Amazon's 162 million share stake, costing nearly $1.85 billion, is worth close to $16.5 billion. These early investors have already made a killing, but have one crucial piece of leverage not afforded to investors of the IPO - downside protection.
With Rivian's $87 billion valuation immediately launching it to the top cohort of the industry, downside potential exists as the company has miniscule delivery and revenue potential for the next few quarters. While long investors of the IPO have no protection to potential downside moves to shares, Ford and Amazon do, as the respective average purchase prices of their shares stands at about $11-12. Therefore, the two can withstand large downside swings, to the tune of ~80% in shares, while still seeing gains within those original investments; 50% downside in Rivian to the $50 range could severely rattle IPO investors, while these two would still hold 350-400% returns. Ford and Amazon can sit back and watch the show unfold, while early investors are betting heavily on immediate success of scaling volumes and growing revenues to find upside from an $87 billion valuation.
Ford's 103 million share stake in Rivian, which cost around $1.2 billion in total, is worth around $10 billion as of close, or eight times return; Amazon's 162 million share stake, costing nearly $1.85 billion, is worth close to $16.5 billion. These early investors have already made a killing, but have one crucial piece of leverage not afforded to investors of the IPO - downside protection.
With Rivian's $87 billion valuation immediately launching it to the top cohort of the industry, downside potential exists as the company has miniscule delivery and revenue potential for the next few quarters. While long investors of the IPO have no protection to potential downside moves to shares, Ford and Amazon do, as the respective average purchase prices of their shares stands at about $11-12. Therefore, the two can withstand large downside swings, to the tune of ~80% in shares, while still seeing gains within those original investments; 50% downside in Rivian to the $50 range could severely rattle IPO investors, while these two would still hold 350-400% returns. Ford and Amazon can sit back and watch the show unfold, while early investors are betting heavily on immediate success of scaling volumes and growing revenues to find upside from an $87 billion valuation.
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$Rivian Automotive (RIVN.US)$ At the IPO valuation, Rivian would be worth nearly as much as $Ford Motor (F.US)$ , valued at $79 billion, and $General Motors (GM.US)$ valued at $85 billion. This, despite the fact that the company has not even earned any meaningful revenue. Both these firms have decades of production experience and have allocated billions of dollars to competing in the EV market.
Asset growth effects tell us that low-growth stocks tend to outperform high-growth stocks. To defy the gravitational pull of asset growth effects, a business has to have competitive advantages, chief of which are barriers to entry. This allows the business to defend its profitability and support high valuations. The hype around EV companies like Rivian is that they can build the car of the future because they can create vertically-integrated ecosystems suited to the production of EVs and for capturing revenue across the lifecycle of a vehicle.
The EV market is massive. Rivian estimates that it has a serviceable addressable market of $1 trillion and a total addressable market of $9 trillion.
The narrative is that EV makers like Rivian are disrupting the traditional automobile industry and that international combustion engine vehicle makers will decline as consumers shift to EVs. However, a company like GM can leverage a century of manufacturing expertise to develop enough EVs to satisfy actual demand, while remaining profitable. A company like Rivian, on the other hand, because it's a pure play, does not have the ability to hedge its capital allocation and earn profits from traditional sources of income. It has to be prepared to spend a long time in the red while it grows in pursuit of minimum viable profitability.
In 2020, just 3 million EVs were sold across the world, which is around 46% of the number of cars that GM sold that year. GM and other incumbents understand that EVs are still a niche market and talk of a mass pivot to EVs is way ahead of schedule. The business case for GM or Ford pivoting to EVs just isn’t there. It makes more sense for them to enter the market in full force when they can leverage their scale to earn superior profits.
That time is now. BloombergNEF estimates that the EV market will produce 26 million vehicles in 2030. In 2020, global car sales were 64 million. Rivian does not have the track record, expertise or capacity to compete in what fans believe is its natural territory. Importantly, markets like these attract competition, and the effect of that is that operationally efficient manufacturers who can produce at low cost are more likely to succeed because competition drives prices down. A startup like Rivian has higher costs than a traditional car maker because it has to build everything from scratch, whereas a traditional car maker just has to adjust its infrastructure and processes. Rivian does not have the competitive advantages to support high profitability and will fall prey to the gravitational force of asset growth effects.
Comparisons to Tesla are far off. Whatever you think of Tesla, it actually earned revenues from vehicle sales before it went public. In 2010, when it went public, it delivered more than 1,500 vehicles. Have you ever seen a Rivian car? Rivian’s core earnings were -$398 million in 2019, falling to -$982 million in 2020, with the company burning -$2.5 billion in free cash flow (FCF) in 2020. Rivian has all the fingerprints of a startup, not an IPO-ready business.
Asset growth effects tell us that low-growth stocks tend to outperform high-growth stocks. To defy the gravitational pull of asset growth effects, a business has to have competitive advantages, chief of which are barriers to entry. This allows the business to defend its profitability and support high valuations. The hype around EV companies like Rivian is that they can build the car of the future because they can create vertically-integrated ecosystems suited to the production of EVs and for capturing revenue across the lifecycle of a vehicle.
The EV market is massive. Rivian estimates that it has a serviceable addressable market of $1 trillion and a total addressable market of $9 trillion.
The narrative is that EV makers like Rivian are disrupting the traditional automobile industry and that international combustion engine vehicle makers will decline as consumers shift to EVs. However, a company like GM can leverage a century of manufacturing expertise to develop enough EVs to satisfy actual demand, while remaining profitable. A company like Rivian, on the other hand, because it's a pure play, does not have the ability to hedge its capital allocation and earn profits from traditional sources of income. It has to be prepared to spend a long time in the red while it grows in pursuit of minimum viable profitability.
In 2020, just 3 million EVs were sold across the world, which is around 46% of the number of cars that GM sold that year. GM and other incumbents understand that EVs are still a niche market and talk of a mass pivot to EVs is way ahead of schedule. The business case for GM or Ford pivoting to EVs just isn’t there. It makes more sense for them to enter the market in full force when they can leverage their scale to earn superior profits.
That time is now. BloombergNEF estimates that the EV market will produce 26 million vehicles in 2030. In 2020, global car sales were 64 million. Rivian does not have the track record, expertise or capacity to compete in what fans believe is its natural territory. Importantly, markets like these attract competition, and the effect of that is that operationally efficient manufacturers who can produce at low cost are more likely to succeed because competition drives prices down. A startup like Rivian has higher costs than a traditional car maker because it has to build everything from scratch, whereas a traditional car maker just has to adjust its infrastructure and processes. Rivian does not have the competitive advantages to support high profitability and will fall prey to the gravitational force of asset growth effects.
Comparisons to Tesla are far off. Whatever you think of Tesla, it actually earned revenues from vehicle sales before it went public. In 2010, when it went public, it delivered more than 1,500 vehicles. Have you ever seen a Rivian car? Rivian’s core earnings were -$398 million in 2019, falling to -$982 million in 2020, with the company burning -$2.5 billion in free cash flow (FCF) in 2020. Rivian has all the fingerprints of a startup, not an IPO-ready business.
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Columns Why I Want In On This EV IPO
$Rivian Automotive (RIVN.US)$ another highly competent 100% EV manufacturer, is set to go public shortly in an IPO that should value the startup at around $65 billion. I want to own this stock, but first, what makes 100% EV companies "hot" in the first place, and why are they valued like high-growth tech companies rather than traditional automakers?
There are essentially only a handful of prominent "true" EV manufacturers. Holding a trillion-dollar-plus valuation in this space, $Tesla (TSLA.US)$ is the current undisputed leader in this sector. However, other players like $Lucid Group (LCID.US)$ , $NIO Inc (NIO.US)$ , $XPeng (XPEV.US)$ and now Rivian are emerging and should capture significant market share in future years.
These companies trade at 10-20X expected sales because their revenues are exploding and should continue to advance notably higher in the coming years. The EV segment is growing at remarkable speed, and the aging ICE industry could be left in the dust much sooner than many envisioned.
While traditional automakers are still pivoting toward more robust 100% EV programs, I now consider their ICE segments as future liabilities rather than assets. The EV sector should perpetually take market share away from ICE as we advance. Thus, you're looking at stagnant growth and lower profitability potential with traditional automakers vs. higher profitability and nearly limitless growth potential with high-quality 100% EV manufacturers. That is why we have such a massive disconnect in valuations, as traditional ICE companies and 100% EV manufacturers are two very different segments with significantly different profitability and growth dynamics.
There are essentially only a handful of prominent "true" EV manufacturers. Holding a trillion-dollar-plus valuation in this space, $Tesla (TSLA.US)$ is the current undisputed leader in this sector. However, other players like $Lucid Group (LCID.US)$ , $NIO Inc (NIO.US)$ , $XPeng (XPEV.US)$ and now Rivian are emerging and should capture significant market share in future years.
These companies trade at 10-20X expected sales because their revenues are exploding and should continue to advance notably higher in the coming years. The EV segment is growing at remarkable speed, and the aging ICE industry could be left in the dust much sooner than many envisioned.
While traditional automakers are still pivoting toward more robust 100% EV programs, I now consider their ICE segments as future liabilities rather than assets. The EV sector should perpetually take market share away from ICE as we advance. Thus, you're looking at stagnant growth and lower profitability potential with traditional automakers vs. higher profitability and nearly limitless growth potential with high-quality 100% EV manufacturers. That is why we have such a massive disconnect in valuations, as traditional ICE companies and 100% EV manufacturers are two very different segments with significantly different profitability and growth dynamics.
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Dartist : wow