Amazon-backed electric vehicle (EV) maker Rivian Automotive (RIVN) is set to go public via IPO in the next week. As Tesla (NASDAQ: TSLA) continues its spectacular bull run and other EV makers coast on its tailwinds, it seems Rivian is set to go public at an opportune time.
Rivian will launch on the NASDAQ with the ticker symbol RIVN. And according to its S-1 filing, it plans to launch shares priced between $57 and $62 each. This will generate a market cap of around $60 billion.
What is Rivian?
Rivian makes premium electric SUVs, vans, and pickup trucks. The company creates solutions that redefine traditional automotive economics and remove the pain points of conventional ownership.
It also manufactures autonomous electric vehicles intended to offer a comfortable and eco-friendly drive experience. Robert J. Scaringe founded Rivian in Plymouth, Minnesota, in 2009. The passionate founder had recently completed a doctorate in mechanical engineering at MIT and wanted to design a sports car.
After several hurdles, the company switched to designing electric pickup trucks and SUVs as the growing consumer trend became obvious.
Rivian exists to create products and services that help our planet transition to carbon neutral energy and transportation. Our society today will have a profound impact on the planet and the world our kids, and their kids, will inherit. - Rivian’s Founder and CEO, Robert J. Scaringe
EVs for consumers and commercial customers
For consumers, Rivian has launched the R1 platform with its first-generation consumer vehicle, the R1T. This is a two-row five-passenger pickup truck. It began delivering these in September.
Rivian's R1S is an R1S, a three-row seven-passenger sports utility vehicle ("SUV"), which it plans to start delivering in December. By the end of 2021, the company hopes to produce approximately 1,200 R1Ts and 25 R1Ss and deliver approximately 1,000 R1Ts and 15 R1Ss.
As of September 30, 2021, we produced 12 R1Ts and delivered 11 R1Ts, and as of October 31, 2021, we produced 180 R1Ts and delivered 156 R1Ts. Nearly all of these vehicles were delivered to Rivian employees.
In addition to consumer vehicles, Rivian is producing commercial vehicles. This is where Amazon's interest comes in.
Rivian's Electric Delivery Van has been designed and engineered by the firm in collaboration with Amazon, its first commercial customer. Amazon has ordered an initial 100,000 vehicles globally, representing the largest order of EVs ever.
Furthermore, Amazon owns a 20% stake in the company, worth around $3.8 billion, according to its S-1 filing.
Rivian plans to have delivered 10 of these electric delivery vans by the end of the year.
Rivian is cashing in on the subscription revenue boom
Along with its vehicles, the company sells a suite of value-added services includes digitally-enabled financing, telematics-based insurance, proactive vehicle service (maintenance and repair), flexible membership and software services, comprehensive charging solutions, and a data-driven vehicle resale program. We expect these services to generate long-term brand loyalty while also creating a recurring revenue stream for each vehicle across its lifecycle.
Furthermore, Rivian sells a fleet management subscription platform to commercial customers.
What is Rivian worth?
Rivian has revenues of $1.3 billion and employs 2000 people. Back in January, the company was valued at $27.6 billion following a funding round. So, it has come a long way since then if it achieves its $60 billion-plus IPO target.
Rivian has enjoyed eight funding rounds in its lifetime, with the most recent being a $2.5 billion funding round in July 2021.
Notable investors in this round included Amazon (NASDAQ: AMZN), Coatue, D1 Capital Partners, Dragoneer Investment Group, Fidelity Management and Research, Ford Motor Co (NYSE: F), T Rowe Price (NYSE: TROW), and Third Point Ventures.
Vehicle manufacturing is a notoriously expensive endeavor, and Rivian is no exception. The company has burned through around $2 billion in cash in the first half of this year alone. Its big ambitions require a state-of-the-art factory and the ability to scale production rapidly.
In a quick comparison with existing vehicle manufacturers, a $62 billion market cap would pitch it level with Stellantis (NYSE: STLA), the owner of Fiat Chrysler, Jeep, Maserati, Alfa Romeo, and Peugeot, to name a few.
Furthermore, this would beat the market caps of the following household names:
Ferrari (NYSE: RACE) - $45 billion
Honda Motor Co Ltd (NYSE: HMC) - $54 billion
Lucid Group (NASDAQ: LCID) - $54 billion
Fisker Inc (NYSE: FSR) - $5 billion
But it would still fall below these popular auto stocks:
Nio (NYSE: NIO) - $68 billion
Ford Motor Company (NYSE: F) - $72 billion
General Motors Company (NYSE: GM) - $80 billion
Volkswagen (OTCMKTS: VWAGY) - $142 billion
Toyota Motor Corp (NYSE: TM) - $292 billion
Tesla (NASDAQ: TSLA) - $1.2 Trillion
When will Rivian IPO?
The official date has not yet been set, but rumor has it Rivian will IPO within the next week.
At IPO, Rivian Automotive will offer 135,000,000 shares of its Class A common stock. There will also be an option for underwriters to purchase up to 20.25 million additional shares.
Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes and is convertible at any time into one share of Class A common stock.
On completion, an affiliate of Rivian's Founder and CEO, Robert J. Scaringe, will hold all outstanding shares of its Class B common stock. This will amount to approximately 8.9% of the voting power of Rivian's outstanding capital stock.
Rivian's bookrunner is Goldman Sachs & Co. LLC.
Several of its investors, such as Amazon, have shown an interest in purchasing up to an aggregate of $5 billion of shares of Rivian's Class A common stock at the IPO price (including $200 million of shares of Class A common stock which Amazon has indicated an interest in purchasing).
These class A shares purchased by the cornerstone investors will not be subject to a lock-up agreement with the underwriters. This means they are free to sell whenever they wish.
Is Rivian the next Tesla?
With Tesla's spectacular rise to a $1.3 Trillion market cap, it's no wonder that investors are looking for the next great EV opportunity.
And Rivian is certainly a potential contender with its high-profile backing and impressive attempt to corner the rugged terrain vehicle market.
Like Tesla, Rivian's offerings are sleek and stylish, starting at $70k. With Ford on board, there are high hopes eager shoppers will snap up these 'Build Ford Tough' trucks.
Indeed, the Ford F-150 is the best-selling vehicle in the United States.
However, Rivian is actually being sued by Tesla.
On July 17, 2020, Tesla, Inc. filed suit against Rivian Automotive and a number of its employees, who previously worked for Tesla. The company alleges loss of trade secrets, breach of contract and additional claims against the individual defendants.
Tesla alleges that the individual defendants took confidential and trade secret documents when they jumped ship to Rivian.
We believe Tesla’s claims are meritless and intend to vigorously defend against this lawsuit.
Will Elon Musk buy shares in Rivian?
Long-since touted as a challenger to Tesla. Investors are now speculating whether Elon Musk will buy shares in Rivian or even have Tesla attempt to buy it outright.
Going by Elon's public disdain for the company, it's unlikely this scenario will play out.
Should you invest in the Rivian IPO?
Rivian IPO Pros
Rivian is backed by major players, including Amazon and Ford.
Both Amazon and Ford have strong track records in delivering quality.
A strong EV to corner the tough-truck market is in high demand.
Its electric delivery vans have considerable target market potential.
Rivian IPO Cons
Rivian is being sued by Tesla, this is a dark cloud hanging over it.
The EV and IPO markets are hugely speculative, and overvaluation is a risk.
Rivian has yet to deliver a vehicle commercially to the wider public and the Amazon order is not guaranteed. This is already priced into the valuation so if they don't deliver the share price could easily plummet.
There is a risk investors could pull out at IPO due to no lock-up agreement, which would cause volatility early on.
Electric vehicles and IPOs are hot, and together they're a lethal combination. If the retail interest in Tesla is anything to go by, the Rivian IPO is sure to be an exciting ride.