Rivian set for a $70bn valuation

While Tesla may be valued at over $1trn, the jury remains out as to whether other electric car companies will be able to ride the investment train in the same way, when it comes to electric vehicles.

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.

As we look ahead to this week Rivian, which to date doesn’t have the cachet or brand that Volvo, or even Tesla for that matter is hoping to raise $10bn in its own IPO when it looks to sell 135m shares at between $72 and $74 a share after it raised its IPO pricing on Friday from $57 to $62. This would equate to a valuation of over $70bn, close the valuations of Ford and GM which have market caps of between $70bn and $80bn, with various seed investors including Amazon, committing to buy $5bn of the 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 100k electric vehicles for its logistics fleet by 2025, while Ford also has a stake.

Rivian currently has the capacity to produce up to 150k 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 prioritize the delivery of 100k electric vans for Amazon, over the next few years.

The company began deliveries of its R1T pickup back in September at a retail price of about $67.5k and plans to start deliveries of its SUV in December at about $70k a unit, with plans to deliver about 40k vehicles in 2022.

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 $1k 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, labor, and other costs, in order to establish a margin, and in turn establish 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.