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🔌 Is Rivian’s Blockbuster IPO Justified?
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🔌 Rivian: Froth Or Animal Spirits?
Market cap of $100B on debut. Revenue of less than $1M so far this year. No, that's not a typo! And we're not fooling around on a Friday. This is Rivian (RIVN), in a nutshell, the Amazon-backed EV manufacturer, which went through with the world's largest IPO of the year. (Tweet This)
R For Rivian. R For River.
Rivian was founded as Mainstream Motors in 2009 by CEO Robert Scaringe. It underwent another name change to Avera Automotive before Scaringe finally settled on Rivian. Their first model was supposed to be a sports car. It unveiled a sporty coupe prototype in 2011, which was later scrapped.
Rivian operated in Stealth mode for the next few years until 2015, when it received a large investment from an undisclosed investor. That funding allowed the company to open research facilities in Michigan and the Bay Area. It started focusing on Electric Autonomous Vehicles and building an entire ecosystem of related products.
In December 2016, Rivian purchased a plant sans its equipment from Mitsubishi Motors in Illinois for $2M. The company also received an award of $49.5M edge tax credits on the promise of Rivian investing $40.5M into the factory over the next five years and meeting specific employment benchmarks.
Rivian unveiled its first two products a year later - an electric five-passenger pickup truck and an electric seven-passenger SUV, named A1T and A1C, respectively. In 2018, both models were renamed R1T and R1S, respectively.
Rivian hit the jackpot in February 2019 when it announced a $700M funding round led by e-commerce giant Amazon. Amazon also placed orders for 100K electric delivery vans. Today, Amazon holds a 20% stake in Rivian, valued at $17B after the IPO.
Barely two months after Amazon's investment, Ford joined the party with a $500M investment in Rivian. Ford's ~12% stake is currently valued at over $10B.
The EV Euphoria!
Last month, Rivian filed for an IPO. In the first half of 2021, the company had a net loss of $994M on zero revenue. The company raised $11.9B in its IPO, selling shares at $78 apiece, higher than the initial range of $57 - $62. The IPO valued the company at a whopping $66.5B!
Come the date, the shares listed at $106.75 per share, a premium of nearly 40% from its IPO price. At this price, Rivian was valued at $91B, higher than Ford ($77B)! The stock ended the day with a 29% gain and a market cap of $86B, the same as GM!
The discerning reader will have no doubt noticed there isn’t much to report on the financial front. Zero revenue in the first half of 2021. Loss of $1.28B in Q3 on expected revenue of less than $1M. Many future growth expectations are baked into the valuation, and there’s no correlation with current results.
The R1T all-wheel-drive pickup truck went into production in September 2021. Its topline hinges mainly on the lofty Amazon order, which expects at least 10K delivery vehicles on the road by next year. The R1S SUV is likely to be launched next month. There’s a backlog of 55.4K R1Ts and R1Ss to be delivered by 2023.
On the other hand, former company executive Laura Schwab, who previously led Aston Martin's US operations, filed a lawsuit accusing the company of having a toxic culture and that her employment was wrongfully terminated as a result of which, the unvested equity she held in Rivian had lapsed.
Rivian is currently on cloud nine. Maybe even higher! The higher it soars, the lower its margin for error, and the more unforgiving the markets will be. For now, Rivian’s investors and employees are happy to bask in the glory of a very successful IPO!
RIVN ended at $122.99, up 22.10%.
Company Snapshot 📈
RIVN $122.99 +22.26 (22.10%)
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Today's Market Terminology: Earnings Per Share (EPS)
Earnings per share is the monetary value of earnings per outstanding share of common stock for a company. It is calculated by dividing the company's profits by the outstanding shares of common stock
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