🚚 Can Rivian Regain The Lost Ground?
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🚚 Rivian: Is Recharge Possible?
Losses of $1B a quarter. Revenue is close to nothing. The largest IPO of 2021. That’s Rivian Automotive (RIVN) in a nutshell. And it’s also a reflection of the IPO frenzy in the year gone by. In a stunning turnaround, Rivian’s shares are now below their first-day closing price. Are the brakes failing? (Tweet This)
The Roller Coaster Ride…
Rivian listed last November with a market cap of $100B, higher than one of its backers, Ford (F), and equal to that of General Motors (GM). The company was expected to price the shares around $58. When they finally fixed the price, it was 37% higher at $78. Was that too high for people to bite?
Such was the frenzy to buy what was billed as the next Tesla that the shares listed at $106.75 apiece. Then, within a week of listing, the shares shot up to a staggering $179.47. And then the party came to a screeching halt.
In its first quarter as a public company, Rivian reported a net loss of $1.23B. The numbers were in-line with what the company had guided for earlier. Loss per share stood at $12.21, much wider than analysts' estimates of a loss of $5.52.
The management chimed in with the view that the company will fall a few hundred vehicles short of its 2021 production target of 1.2K vehicles. This shortfall was supposedly due to supply chain issues and challenges in scaling up production.
The company had total vehicle bookings of 71K for its R1T pickup and R1S SUV. However, as of December 15th, the company had produced only 652 R1T and R1S vehicles and delivered 386 of those.
At the same time, the company is busy expanding operations. At its facility in Normal, Illinois, plans are underway to increase production to 200K units per year (from the current 150K). In addition, it is negotiating incentives with the state of Georgia to commence construction of a new plant that will come online in 2024. The capacity of that plant: 400K vehicles per year.
Elon Musk was unforgiving when he aired his opinion that Rivian’s true test would be when the company meets high production targets while achieving break-even cash flow.
All that didn’t matter since Amazon is a key investor in the company, having pumped in more than $1B over multiple rounds. It was also looking to acquire 100K electric delivery vans by 2024. The company was betting on a mega order from Amazon, which intends to have 100K electric delivery vans for itself by 2024. That hope unraveled mid-week.
… Continues Topsy Turvy
On Wednesday, Stellantis (formerly Fiat Chrysler) announced it’s partnering with Amazon in a couple of ways. One, Stellantis will use Amazon Web Services (AWS) to develop the cockpit software. And two, Amazon will become the first customer of the company’s Ram ProMaster battery-electric vehicle (scheduled to be launched in 2023).
It’s not the first time the two companies are collaborating. Since 2018, Stellantis has delivered tens of thousands of vehicles to Amazon to facilitate last-mile delivery in North America and Europe.
This multi-year cloud deal will incorporate Amazon's Alexa voice assistant in the cockpit to support the driver with navigation and other elements. AWS will also become the preferred cloud provider for Stellantis’ other vehicle platforms.
Even as Amazon clarified the deal with Stellantis is independent of its relationship with Rivian and that it’s committed to the partnership with Rivian both as an investor and as a customer, the investors pressed the panic button.
What’s all this without a courtroom drama? Last July, Tesla had filed a lawsuit against four of its former employees and Rivian, accusing the company of poaching talent and stealing trade secrets. Then, in mid-December, a California judge gave Tesla and Rivian a 30-day deadline for pre-trial information sharing.
By next week, Tesla must substantiate its claims regarding documents it says were stolen, and Rivian must demonstrate how it investigated the alleged theft of trade secrets. No doubt, there’s more to this story in the weeks to come.
Missed production targets. The struggle to ramp up capacity. Financial performance that’s not something to go gaga about. A lawsuit that can go either way. All these uncertainties came home to roost and reflected in the stock price that is now below the closing price on the first trading day and more than 50% below its peak.
Does Rivian have what it takes to recharge its batteries as it guns for Tesla in the long run? Do investors have the patience to wait until the company sharpens its game? That’s the $81B question.
RIVN ended at $87.33, down 2.98%.
Company Snapshot 📈
RIVN $87.33 -2.68 (2.98%)
Analyst Ratings (15 Analysts) BUY 67% HOLD 27% SELL 6%
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Today's Market Terminology: Joint Stock Company
A Joint Stock Company is a form of a business organization that falls between a corporation and a partnership. The company sells stock, and its shareholders are free to sell their stock, but shareholders are liable for all debts of the company
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