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IPO watch

Rivian IPO set for $76bn valuation

Rivian IPO - a close-up of the steering wheel of an electric vehicle

Ahead of today's Rivian IPO, the jury remains out as to whether, aside from Tesla's valution of over $1trn, other electric vehicle companies will be able to ride the investment train in the same way.

Volvo Cars' recent IPO fetched a much more modest $18bn when it came out of the blocks at the end of October, largely due to a reticence on the part of investors to pay up for a higher valuation.

Rivian IPO raises $11.9bn

As we look ahead to today's Rivian IPO, which doesn’t so far have the cachet or brand that Volvo or even Tesla has for that matter, the company has managed to raise $11.9bn having sold a higher than expected 153m shares at $78 a share, after it raised its IPO pricing last Friday from $57 to $62.

This would equate to a valuation of over $76.4bn, in the biggest IPO this year, and in line with the valuations of Ford and General Motors, which have market caps of between $70bn and $80bn.

This is absolutely extraordinary even with various seed investors, including Amazon and Ford, committing to buy $5bn of the Rivian IPO shares. This compares to a funding round earlier this year of $27.6bn in January this year.

There is certainly a big contrast between the appetite in Europe when it comes to electric vehicles, and the appetite in the US, if Rivian is able to get the valuation it is looking for. The so-called new kid on the block certainly has some decent backers, with Amazon taking a 20% stake in the business with a view to getting the company to produce 100,000 electric vehicles for its logistics fleet by 2025, while Ford also has a stake.

Rivian currently has capacity to produce up to 150,000 vehicles annually, having gained regulatory approval to sell and deliver its trucks and SUVs to all 50 US states last month, although it will probably prioritise the delivery of 100,000 electric vans for Amazon, over the next few years. The company began deliveries of its R1T pickup back in September at retail price of about $67,500, and plans to start deliveries of its SUV in December at about $70,000 a unit, with plans to deliver about 40,000 vehicles in 2022.

Profit unlikely anytime soon

On the fundamentals front, Rivian hasn’t made a profit yet, however neither did Tesla until recently so that isn’t really an obstacle. Losses in 2019 were $426m and in 2020 were over $1bn, as it built a factory in Normal, Illinois.

To date the company hasn’t generated any revenue to speak of, although it has taken a number of $1,000 refundable deposits for pre-orders. This makes it rather difficult to establish key metrics like how much it costs to make a vehicle in terms of parts, labour, and other costs, in order to establish a margin, and in turn establishing a baseline for profitability.

In its latest Q3 numbers, the company said it expected to see a loss of up to $1.28bn and said it doesn’t expect to be profitable in the near future, which makes the upcoming IPO somewhat of a leap of faith for both the wary, and unwary.

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