This week Rivian revealed in an SEC filing (S-1) about going public (via an IPO), they are expecting the capital raise to promote their market cap to a valuation of US$80 Billion. The number of shares offered and the price range for the proposed offering are yet to be determined.
This massive valuation has many asking how a new automaker that is yet to ship a single vehicle, could possibly be worth more than other automakers like Ford and GM that make millions of vehicles per year.
The most obvious difference between Rivian and these legacy automakers is that Rivian doesn’t have the challenge of transitioning legacy factories designed to produce ICE vehicles and the awkward dealership model in a world that’s rapidly going EV and moving to online orders.
Rivian is an all-electric automaker and their products have certainly impressed, with unique designs and competitive specs. Importantly Rivian has carved out a nice niche for themselves, going after the off-road market, appealing to those who love going off-road for camping, fishing etc.
The company has plans for 2 vehicles, the R1T truck and the R1S SUV the manufacturing of which is currently underway, but customer deliveries have been delayed until September.
To date, Rivian has received $10.7 billion in previous funding rounds, predominantly from Amazon, but also Ford.
In February, rumours began that Rivian was looking to IPO this year with an expected valuation of around $50 Billion according to Bloomberg. By May this number had swelled to an estimated $70 Billion and now in August, we’ve reached $80 Billion.
It is expected that Rivian will IPO around November 25th, so by then, they definitely should have commenced customer deliveries. As it stands today, Rivian is a pre-delivery company which also means they are a pre-revenue company, even once they start shipping products, it’s unlikely they will ship in any serious volume until 2022. Even once the money starts flowing in a valuation of anything close to $80 Billion will translate to an extraordinary price-to-earnings ratio.
Being in the electric vehicle race, it’s hard to avoid comparisons to Tesla and Ed Ludlow does a good job at providing perspective on where Tesla was on their production/delivery ramp, when they reached a market cap of $80 Billion, just last year. Since then, Tesla has gone on to become the highest valued automaker, currently sitting at a $704.81 Billion market cap.
Another pre-delivery EV maker Lucid Motors, is currently sitting at $34.04B which shows the market is a little crazy right now, building in a lot of value for the work to come over future years.
Ford has a Market Cap of $52.23 Billion, with around 200,000 employees making 4.2 million vehicles worldwide. That same year, General Motors made around 6.83 million vehicles, with around 155,000 employees, and has a Market Cap of $72.30 Billion.
It is clear from these comparisons, valuing Rivian at $80 billion doesn’t make a lot of sense. They are playing in the right game, that is, they’re focused on making all-electric vehicles which are clearly the future. For the price tag to make any sense, Rivian is going to need to ship vehicles to customers, ramp production, and expand their model lineup, while being profitable. Basically, they’ll need to have almost everything go right in their execution over the next half a decade.
What isn’t clear from Rivian is what their autonomous story will be. While Rivian is targetting the adventurous type, driving off-road only comes after getting out of the city, through traffic and congestion and for that section of the drive, you’d love for it to be autonomous. It is possible that consumer expectations have moved considerably by the end of the decade to expect our cars to offer autonomy and unless you offer it, you could see competitors become a real issue.