Rivian's IPO: Overly dependent on Amazon with an expensive valuation - The Average Joe

    Rivian’s IPO: Overly dependent on Amazon with an expensive valuation

    Kevin Roche — Analyst

    October 12, 2021

    Rivian's IPO: Overly dependent on Amazon with an expensive valuation

    October 12, 2021

    Breakups are messy, and Rivian hopes to never feel the pain. The much-hyped electric vehicle (EV) maker, which may be a little too dependent on Amazon, recently filed to go public. It’s seeking an $80B valuation, a massive number for a company with zero sales.

    Driving out of stealth mode

    Global EV demand is slowly taking off with the increasing adoption of environmentally-friendly policies. Global EV sales rose to 3m last year, a 40% increase from 2019 – with growth expected to rise to nearly 30M annually by 2030.

    Rivian is trying to do for trucks what Tesla did for personal vehicles.

    Founded in 2009 by RJ Scaringe, Rivian operated in “stealth mode” – secrecy – until 2019, when Jeff Bezos invested $700M and committed to purchasing 100K vehicles.

    Two months later, Ford followed suit with a $500M investment.

    Rivian became sought out by big-name investors – bringing in $10.7B in investments to date.

    Selling its soul to Bezos

    Building a car company is expensive and Rivian’s IPO tells the story of a cash-burning machine trying to bring its cars to market:

    • $1B net loss in the first half of 2021 with zero car sales.
    • The company expects to spend another $8B by the end of 2023.

    Rivian is expected to deliver its first vehicles by Christmas and a lot can go wrong before its cars hit the market…

    • Amazon isn’t bound to its 100k vehicle order and could walk away.
    • It also has exclusive rights to Rivian’s delivery vehicles for four years – which could be a death sentence if Amazon walks.

    At an $80b valuation, Rivian isn’t cheap, leaving little upside for investors. Its price assumes a lot to go as planned, including its relationship with Amazon – which owns up to 10% of the company.

    Investors: Show me the vehicle

    Investors who bought into hyped EV companies with zero sales have been burned before. Once promising EV startups, Lordstown and Nikola, crashed and burned from fraud charges – taking investors down with ‘em.

    Just as Rivian is backed by the likes of Amazon, Ford and other big-name investors, Nikola had General Motors – before the fraud was discovered and GM pulled the plug on its investment.

    Big backing doesn’t guarantee success, and until Rivian’s vehicles finally hit the road, investors should remain cautious.

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