What Investors Should Know about Rivian IPO
Electric-vehicle maker Rivian Automotive Inc. is set to become a public company, through an IPO. Rivian hopes to carve a niche for itself offering EVs for consumers with “adventure and active lifestyles” and enterprises seeking to electrify their fleets.
The company filed for an IPO in August and priced its shares at $78 each Tuesday night – this was higher than their already-elevated range of $72 to $74 a share. The company plans to sell 153 million shares when it goes public Wednesday on the Nasdaq, raising a whopping $11.9 billion.
Rivian is valued at about $77 billion on a fully diluted basis and is backed by both Amazon and Ford Motors.
Here is what investors should know as Rivian lists on the Nasdaq.
1. What is the Rivian IPO?
- Rivian hopes to carve a niche for itself offering EVs for consumers with “adventure and active lifestyles” and enterprises seeking to electrify their fleets.
- Rivian filed for an IPO in August and priced its shares at $78 each Tuesday night – this was higher than their already-elevated range of $72 to $74 a share. The company plans to sell 153 million shares when it goes public Wednesday on the Nasdaq, raising a whopping $11.9 billion.
- Rivian is valued at about $77 billion on a fully diluted basis and is backed by both Amazon and Ford Motors.
- The EV maker has raised $10.5 billion since 2019 after several investment rounds, with the latest a $2.5 billion funding round in July, led by Amazon.com’s Climate Pledge Fund, Ford, and T. Rowe Price funds, among others.
2. What does Rivian Do?
- Rivian was founded in 2009 by RJ Scaringe, who had just completed his Ph.D. program at MIT’s Sloan Automotive Laboratory. The company initially set out to build an electric sports car, but in early 2012 switched focus to electric SUVs and trucks.
- Rivian moved its headquarters from Michigan to California in 2020. It began production in its first factory in Normal, Illinois this summer and has reportedly kicked off the search for its second factory location.
3. What is Rivian’s Target Market?
- Rivian is targeting two audiences with its vehicles: consumers with “adventure and active lifestyles” and enterprises seeking to electrify their fleets. In the consumer space, Rivian has the R1T, a two-row passenger pickup truck, as well as the R1S, a three-row SUV. At the end of September, 48,390 customers in the U.S. and Canada had put down $1,000 refundable deposits for the R1T and R1S. Rivian began making deliveries for the R1T in September and said it hopes to start delivering the R1S in December 2021.
- On the enterprise side, Rivian hopes to launch the RCV (Rivian Commercial Vehicle), an electric delivery vehicle that is designed in collaboration with Amazon. Amazon ordered 100,000 RCVs, which was the largest single order of EVs ever. But in the S-1, Rivian disclosed that its agreement with Amazon “may be terminated by either party with or without cause, subject to compliance with certain termination provisions.”
4. Like Tesla, it wants to create a vertically integrated ecosystem.
- That includes designing and manufacturing vehicle components such as electronics, batteries, and chassis. The company said it designed its vehicle platforms “for applications beyond the launch versions of R1T, R1S, and EDV,” which could involve becoming an automotive supplier.
- Like Tesla, Rivian is selling its vehicles directly to consumers, skipping dealership networks, and asking for a refundable deposit when people configure their vehicle on its website.
- The Rivian ecosystem also entails having an entire software suite — including autonomous systems — continuously updated through the Rivian Cloud. The company has already started building out an electric charging station network, with 145 Rivian Waypoints charging sites currently spread across 30 states. Rivian thinks it will eventually be able to launch “autonomous mobility as a service” and “energy as a service.”
- In Rivian’s version of the future, all of these services will cost a pretty penny. Rivian defines LTR (lifetime revenue potential of services) as “the revenue we can generate from a vehicle throughout its lifetime if the owner(s) were to use and subscribe to all the additional services and accessory products that we offer.” For consumer vehicles, Rivian estimates an LTR of $67,900. That includes $15,500 from software, $8,700 for insurance and charging services, and $3,500 for vehicle servicing.
5. Rivian has never made money
- Rivian recorded a net loss of $1 billion in 2020, which was more than double the net loss of $426 million recorded in 2019. It’s on track to roughly double losses again in 2021, with $994 million in net losses for the first six months of the year.
- Research and development costs are the biggest culprits: Rivian recorded $301 million in R&D costs for 2019 and $766 million in 2020. For the first six months of 2021, it recorded $683 million, up from $292 million in the first half of 2020. R&D includes engineering, design, payroll, and IT expenses.
- Rivian’s headcount has exploded in recent years, too. The company employed 6,274 people at the end of June 2021, nearly triple what it had just one year prior.
6. What’s at stake?
- Rivian is backed by Amazon which has also ordered 100,000 RCVs, which was the largest single order of EVs ever. The S-1, Rivian agreement with Amazon “may be terminated by either party with or without cause, subject to compliance with certain termination provisions.”
- Amazon also purchased $1.3 billion worth of shares in the company. Still, Rivian has a lot riding on its Amazon partnership, but Amazon has relatively little at stake and can reduce its exposure to Rivian if necessary.