Rivian Stock: Are You Ready to Invest in the IPO?
Updated February 23rd. Lucid Motors has announced a definitive agreement to merge with Churchill Capital IV (NYSE: CCIV). The terms of the deal valued the transaction at $24 billion, and shares of CCIV are now trading at levels that give Lucid Motors an implied valuation north of $60 million. Given that Rivian is in a similar position to Lucid Motors — an EV company looking to gear up for production — its likely the company will be valued similarly upon completion of a traditional IPO or SPAC.
What is Rivian ?
Rivian is an electric car startup with designs that have turned heads, especially with its truck concepts. The company has already struck a deal with Amazon and plans to begin delivering vehicles by mid-2021.
Expected IPO Date:
- Rivian is expected to seek a valuation north of $50 billion in an IPO.
- The company could IPO as soon as September 2021.
- Public companies such as Ford already have partnerships and investments in Rivian, providing a "backdoor" strategy to invest in its success pre-IPO.
- Rivian has raised capital from a number of strategic backers such as Ford.
- The company is launching with a truck and SUV, two very large markets currently underserved by EV models.
- At a valuation north of $50 billion, Rivian could be worth more than Ford before every delivering a car.
- Rivian faces a substantial number of startups in the EV space.
Investors can’t get enough of electric car stocks. In 2020, a host of electric car stocks have successfully debuted via traditional IPO or via a reverse merger with a special purpose acquisition company, or SPAC, and made investors a ton of money. Due to the success of these high-profile electric vehicle stocks, many are eagerly awaiting the highest-profile holdout Rivian.
Will Rivian stock explode higher or disappoint investors after its IPO? Will Rivian stock even IPO this year? Here’s what investors should consider before buying shares once Rivian stock is available to the public.
Why Would I Want to Buy Rivian Stock?
Good question. Lost in the hype surrounding the electric vehicle IPOs and SPACs is an analysis of the competitive advantages of each automaker. This is critical because auto manufacturing is difficult, and all-electric companies are not the same. You should consider the United States has had many automakers throughout its history and only three traditional automakers remain: General Electric, Ford, and Fiat Chrysler.
That hasn’t dented investor sentiment in the electric vehicle space, however. Bolstered by the success of Tesla Motors, there are a host of electric vehicle startups now vying to carve out a name for themselves with future consumers. The EV space is quickly reaching a frenzy and it’s likely many of these start-ups will crash and burn, so it’s important to carefully evaluate each EV maker on its operational excellence, technologies, demand, and capital allocation.
It’s early but it appears Rivian is firing on all cylinders. Despite not being in the public markets, Rivian is among one of the most-capitalized EV makers wisely raising funds from key strategic backers. The company is initially focusing on three models — the R1S SUV, the R1T truck, and the fleet vehicle to be primarily used by Amazon (Nasdaq: AMZN) for package delivery – to keep costs low and keep operations focused.
Can I Buy Rivian Stock Now?
Not yet, but likely soon! Rivian remains a private company, meaning accredited investors – those meeting Securities and Exchange Commission minimum net worth ($1 million, excluding primary residence) or annual earnings qualifications ($200,000 in each of the prior two years, $300,000 if married) – are the only people that able to buy shares in the company at this point.
Even if you meet these lofty limits, it’s still unlikely you will be able to buy Rivian stock directly until the initial public offering. Unlike public shares that are widely available on an exchange, privately held shares are limited.
Founder and CEO RJ Scaringe has traditionally prioritized providing shares for strategic investors — often entities that are able to become large customers and/or suppliers — over pure financial backers, but this has shifted in recent funding rounds.
The most recent rumor is Rivian is in the initial stages of preparing for filing an IPO with a rumored September IPO date.
Rivian Stock: Who Owns It Now?
Rivian is private, so non-accredited investors, outside of employees, are not allowed to buy Rivian stock. Rivian was founded by MIT grad Robert Scaringe in 2009 and he remains the company’s CEO. According to Forbes, Scaringe is part of the “three comma club, with an estimated net worth of $1 billion due to his ownership in the automaker.
Rivian stock has an enviable list of corporate backers. In February 2019, Rivian received a $700 million round of funding with Amazon leading the round. The company is more than an investor: Rivian inked a deal to sell Amazon 100,000 electric delivery vans.
It’s not just Amazon, two months later the company announced another high-profile investor — this time, Ford Motor Company — that dropped $500 million while announcing a plan to use Rivian’s platform for a next-gen Ford electric vehicle.
Boasting quite a few high-profile owners, it’s understandable that many retail investors are itching to buy Rivian stock once the IPO occurs.
Rivian Stock Price: How Much Is It Now?
Rivian has gone through quite a few rounds of funding and the price will change each investment round, and the IPO stock price will be higher than the current private equity price. However, the reports are Rivian is in the final stages of preparing for an IPO with a rumored $50 billion valuation.
If true, it would be nearly double the value of the last private valuation. Here’s a list of each private funding round announced by the company on its news page along with the lead investor and advisor and the amount of the total round.
|Feb. 15, 2019||Amazon||$700 million|
|Apr. 24, 2019||Ford||$500 million|
|Sept. 10, 2019||Cox Automotive||$350 million|
|Dec. 23, 2020||T. Rowe Price||$1.3 billion|
|July 10, 2020||T. Rowe Price||$2.5 billion|
|Jan. 18, 2021||T. Rowe Price||$2.65 billion|
|Total Announced Funding to Date||$8 billion|
You won’t be able to determine the price per share from its funding schedule but as of the most recent round of private funding Rivian has taken about $8 billion of funding at its current market cap which is reported to be approximately $28 billion.
When Can I Buy Rivian Stock’s IPO?
Rivian has been among the highest-profile public holdouts, unlike its competitors that have rushed to go public via SPAC or via the traditional IPO process. However, a February 2021 report from Bloomberg quoted sources the EV truckmaker was planning to go public as soon as September of this year.
Outside of the pending IPO, Rivian has an ambitious 2021 schedule. Rivian plans to roll out three vehicles in 2021: the R1T electric truck is expected to debut in June, the R1S electric SUV is planning for an August release, and the Amazon line of electric vans are expected sometime this year. The company has a long-term goal of producing 250,000 vehicles by 2025, which includes three more consumer-based models with a lower price point.
It makes sense for Rivian stock to go public while the EV stocks are of intense interest. Auto manufacturing is a capital-intensive industry that requires a significant amount of cash. The easiest way for a company to raise money is through the public markets, issuing shares to fund future growth.
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What is Rivian’s Stock Symbol?
As a private company, Rivian does not have a stock symbol yet but it’s likely Rivian stock will opt for a NASDAQ exchange listing. Historically, the New York stock exchange has been preferred by auto manufacturers with both General Motors and Ford being listed on the older exchange. However, newer electric vehicle manufacturers have taken cues from Tesla and have listed on the tech-focused NASDAQ exchange.
The exchange Rivian chooses isn’t that important to investors but might influence the stock symbol. Traditionally, companies on the New York Stock exchange have used symbols that are three letters or less – GM for General Motors and F for Ford – while stocks on the NASDAQ tend to have four letters (TSLA).
A stock symbol sets you apart from other companies in this crowded space and forces investors – that often have short-term memories – to specifically remember your company. Rivian has a choice of symbols like RIVN and RVAN to choose from once it goes public.
Rivian IPO: What Are the Risks?
Rivian faces quite a few risks for its IPO, both as a private company and as a future public stock. First, the automotive industry is labor and capital intensive, requiring significant investments in employees and in equipment.
Recent rounds have been led by T. Rowe Price as an advisor and appear focused on purely financial backers versus the earlier rounds that were focused on key strategic backers.
Pure financial backers might be “cheaper money” because there is a bigger pool of assets and everybody is trying to get their hands on the next big EV stock, often financial backers are looking for a quick turnaround and will dump shares at the IPO date or soon thereafter where longer-term strategic backers often take a long-term view.
For example, during Rivian’s funding round with Ford, it welcomed Joe Hinrichs, Ford’s president of Automotive, to join Rivian’s seven-member board of directors. Additionally, Cox Automotive gained a seat on Rivian’s board of directors with its investment.
To date, the company has been rather selective with its investors but Rivian will likely need to continue tapping the equity markets to fund its operations after its IPO, which presents a risk to the general public if it ends up being a dumping ground for private investors.
Rivian Stock: What Are the Long-Term Risks?
Despite the exploding price for vehicles, many are surprisingly low margin. Rivian’s initial portfolio of trucks and SUVs appears designed to address this concern as they are higher margin than traditional cars.
Fleet vehicle sales, like the high-profile contract with Amazon, also tend to be low margin, and historically automakers lose money on this channel although the company’s 100,000 vehicle deal will likely work as a high-profile proof-of-concept.
Even if Rivian’s models are higher margin for EVs, it will still be difficult to fund the cash flow needed to fund ongoing operations and follow-on stock offerings in the public markets will continue as the company grows its footprint.
EV stocks are all the rage now and valuations are favorable, but investor sentiment can quickly change if there’s high-profile underperformance, and this could affect the entire sector regardless of individual performance.
Next is competition. The number of new entrants in the electric vehicle space has exploded. In the last year numerous electric vehicle stocks have debuted, including Nikola Corporation, Xpeng, Hyliion, Fisker, Lordstown Motors, and Canoo.
Investors – and future consumers – are becoming more acquainted with these companies as their CEOs are on television touting their stock performance. It’s a crowded market that could benefit first-movers that solidify themselves in the eyes of consumers.
That’s not even including established automakers that are finally getting serious about bringing electric vehicles to market after being humiliated by Tesla’s rise. GM CEO Mary Barra has an aggressive slate of EV launches, including high-profile releases like the Hummer EV – that sold out in ten minutes!
Stellantis, a merger of Fiat Chrysler and French automaker Groupe PSA, plans to launch 10 new electric vehicles in 2021 alone including the Jeep Wrangler.
Finally, the auto industry is highly cyclical. Auto sales depend upon a Goldilocks economy, strong enough to give consumers the money and confidence needed to take on a new obligation but not strong enough to compel the Federal Reserve to raise interest rates and impact loan affordability.
Rivian Graph: Valuation vs. Tesla, GM, and Ford
As a private company, Rivian is not required to disclose any information related to its share price or its estimated value, but the company has been forthcoming with the public about its funding rounds.
As outlined above, Rivian recently closed on an investment round of $2.65 billion and has raised $8 billion since its founding. According to Bloomberg News, the valuation is expected to $50 billion at the IPO.
For a company that has not delivered any vehicles, this is an expensive valuation but is common in the electric vehicle market. Currently, the biggest automaker in the world is Tesla, with a current value of $825 billion, but this is an anomaly considering the stock only sold 500,000 models last year.
Traditional automakers like Ford and General Motors that sell millions more every year worldwide have significantly lower market capitalizations per the chart below.
The chart shows investors are creating multiple classes of auto valuations, traditional and electric. With a current valuation of nearly $28 billion (and a rumored IPO valuation of $50 billion!) with no negligible revenue, the market is valuing Rivian like Tesla while traditional autos like Ford and General Motors are not afforded the same multiples.
Over time, it’s likely the differences between these two automaker classifications will narrow, which could present a problem for Rivian if EVs begin to resemble traditional automakers.
Is Lucid Motors a Preview of Rivian?
On February 22nd it was announced that Lucid Motors had entered into a definitive agreement to merge with Churchill Capital IV (NYSE: CCIV), a special purpose acquisition company (SPAC). In the weeks leading up to the announcement, shares of CCIV skyrocketed from $10 (before rumors of the transaction began) to $57. The morning after the announcement, CCIV shares opened down significantly, at just $35 per share.
The question investors might face is: was Lucid Motors a preview for Rivian? Of particular note, Lucid Motors at $57 per share would value the company at an implied market capitalization of more than $90 billion. That’s a valuation more than General Motors, for a company that has yet to deliver a single car!
It’s important for investors looking at Rivian to remember two things. First, valuation still does matter. Second, the terms reported in the media for SPAC mergers can vary from the final agreements. In the case of Lucid Motors, the final terms were different from many media reports, which is likely a major factor that contributed to its drop.
There’s no telling whether Rivian would play out like Lucid Motors, but be careful to understand the price you’re paying (especially if the company chooses a SPAC route).
Also, if you’re looking at the EV space, remember there are a number of potential investment ideas. Rivian has turned heads with its electric truck designs. Its R1T truck has a much more conventional design than Tesla’s upcoming Cybertruck. However, if you’re looking for other options in the electric vehicle space:
- Tesla (Nasdaq: TSLA): The obvious choice if you’re looking at electric car companies. Elon Musk’s vision has led Tesla to a market cap north of $800 billion. Tesla is currently worth about 16X more than the valuation Rivian is seeking so it’s understandable why investors are looking for an EV stock with more upside potential in the coming years. However, Tesla’s lead in areas like manufacturing and self-driving will be difficult to replicate.
- Lordstown (Nasdaq: RIDE): Like Rivian, Lordstown is banking on their electric pickup truck being a breakout hit. Their Endurance truck is targeting a range of 250 miles and a towing capacity of 7500 pounds. Full production of the trucks is currently slated for 2022. Lordstown is currently trading for about $5 billion.
Rivian Stock: Should You Buy the IPO?
It’s impossible to answer this question without seeing the company’s financial position. However, Rivian will be an expensive stock. Rivian is looking to deliver its first vehicles in mid-year 2021 and the fleet vehicle ramp will take some time.
Furthermore, these expensive valuations are at a time when investors are singularly focused on electric vehicle stocks and are willing to pay nearly any price for them on the basis they believe somebody will pay more in the future – aka, the greater fool theory – so it’s impossible to make a valuation argument for owning Rivian stock.
Studies show that IPOs often underperform established stocks in the long run due to overly optimistic investors, so Rivian must ensure it is firing on all cylinders and even then there’s no guarantee investor sentiment and valuation corrections won’t drag the stock down.
In addition to money, Scaringe appears to be taking cues from early investor Jeff Bezos, as he is less motivated about short-term stock appreciation and more motivated about trying to build a great product and solve problems. In the long run that is what the company needs to grow into these lofty valuations. Investors are excited about the future of this company and for good reason.