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November 9, 2021 10:15 AM, EST

Rivian IPO Puts Slow Race to Commercial EV to Public Market Test

Rivian The charging port on a Rivian electric vehicle. (Rivian)

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Eleven years after Tesla Inc. went public with a market value of less than $2 billion, one of its most closely watched competitors is following in its tire treads with a much richer valuation.

Electric truck maker Rivian Automotive Inc. will price its initial public offering Nov. 9, seeking to raise as much as $10 billion in a listing that could give it a fully diluted valuation of more than $70 billion. If shares are sold at the top of their marketed range, it will be the seventh-biggest U.S. IPO on record, data compiled by Bloomberg show.

Investors will be buying into the promise of a class of EVs that mirror the gas-powered vehicles that dominate the passenger market: larger, bulkier vans and pickup trucks that are a sharp contrast to Tesla’s sleeker sedans. The company also has Amazon.com Inc.’s backing— the internet giant owns a 20% stake in Rivian and has placed an order for 100,000 of its delivery vans.

As is the case with many richly valued startups, they also will be buying into ambitious growth plans. Rivian delivered its first vehicles just a couple of months ago and will only produce about 1,200 units by year-end at its plant in Normal, Ill. The company estimates that annual production will hit 150,000 vehicles at its main facility by late 2023.

While demand for Rivian’s products likely will outweigh supply for a number of years, the company faces a “natural ceiling” of 300,000 to 400,000 units per year, New Street Research analyst Pierre Ferragu wrote in a note Nov. 8. That’s partly down to price: Rivian’s R1T truck starts at $67,500 for the most basic model, while its upcoming SUV model is $70,000.

“Above $70,000, the global addressable market for Rivian’s SUV and pickup is less than 1.5 million units, and it will be a crowded space,” Ferragu wrote.

Stealth Mode

Though it is a newcomer to the public market, Irvine, Calif.-based Rivian’s entry into the world of consumer electric vehicles has been more than a decade in the making.

Founder and CEO R.J. Scaringe set up the first iteration of what would become Rivian in 2009 in his home state of Florida.

Rivian CEO and founder RJ Scaringe

Scaringe

Early work centered on a smaller sports car, which later was shelved in favor of a rugged pickup at the direction of early investor Mohammed Abdul Latif Jameel.

The company remained in stealth mode for almost 10 years, until the Los Angeles Auto Show in 2018 where Scaringe, who holds a doctorate from the Massachusetts Institute of Technology, showed his battery-electric pickup and SUV to the public for the first time.

With deliveries finally having started in September, Rivian is the first automaker to bring a battery-electric pickup to market in the U.S. It also is on track to make the most of its first-mover advantage when it starts deliveries of the R1S this year, giving it a lead in the market for full-size battery-electric SUVs.

Competition, Amazon

When competition arrives, it will be plentiful — and often less expensive. Ford Motor Co. has more than 160,000 nonbinding reservations for its F-150 Lightning, the electrified version of its best-selling pickup that starts around $40,000, though it doesn’t go on sale until next spring.

General Motors Co., which walked away from potentially buying a stake in Rivian in 2019, will debut an EV pickup version of its iconic Hummer this fall. It also plans to unveil an EV version of the Silverado pickup at CES in Las Vegas in January.

Tesla, meanwhile, plans to start production on its futuristic Cybertruck pickup late next year at its new plant in Austin, Texas.

Much of the recent optimism around Rivian’s potential valuation comes from Amazon’s backing of the automaker, and particularly its order for 100,000 electric delivery vans by the end of the decade.

The deal for the vans is seen as a point of differentiation for Rivian, giving it some insulation from economic downturns that could hit consumer appetites for passenger EVs. Scaringe has prioritized building hundreds of delivery vans this year, people familiar with the plan told Bloomberg News in October, even though Amazon is under no obligation to actually buy any of them.

Under terms of the agreement, Seattle-based Amazon has exclusive rights to Rivian’s vans for a period of four years, with right of first refusal on all vans produced for another two years after that. Amazon also is permitted to work with other automakers on electric delivery vans.

‘Next Tesla’

“Rivian’s premium market valuation reflects its ownership of the entire value chain and freedom to innovate without dealing with stranded assets,” Pitchbook senior mobility analyst Asad Hussain said. “Between Rivian and Lucid, the market finally has credible candidates for ‘the next Tesla.’ ”

Elon Musk’s Tesla, which recently joined the trillion-dollar-valuation club, might have its own ideas about that.

RoadSigns

In this episode, host Michael Freeze asks, how are companies saving money by leasing trucks rather than owning? For answers, we speak with Jim Lager of Penske Truck Leasing and Al Barner of strategic fleet solutions at Fleet Advantage. Hear a snippet above, and get the full program by going to RoadSigns.TTNews.com.

A legal fight between the companies ramped up last month over Tesla’s claims that Rivian was poaching employees and, in the process, stealing “highly proprietary” battery technology. Rivian denied the claims, which it had accused Tesla in August 2020 of making up to stop employees leaving, and to stifle the growth of competitors.

If Rivian hits, or exceeds, the market valuation of $63 billion that it is aiming for in its IPO — excluding employee stock options and restricted stock units — it would eclipse decadesold automakers such as Japan’s Honda Motor Co., valued at about $53 billion, and France’s Renault SA at $11 billion.

A first-day rally in the shares, which have characterized several recent IPOs by well-known companies, could see Rivian’s valuation top that of Ford, General Motors and fellow EV maker Lucid Group Inc., which went public via a blank-check company in July and now is worth about $74 billion. Rivian was last valued at $27.6 billion in a funding round in January, Bloomberg News reported.

Rivian plans to use the proceeds from its IPO for working capital, to fund growth and for other general corporate purposes, according to its listing paperwork. As well as ramping up hiring and increasing the volume of materials bought from its supply chain to meet demand, the company is planning to build a second U.S. factory and is in talks with the city of Fort Worth, Texas, to invest $5 billion in a plant there. Rivian also is eyeing a third factory in Europe, Bloomberg reported in January.

The company had a net loss of $994 million in the first six months of 2021, compared with a $377 million deficit a year earlier, according to its filings. It expects to record a quarterly net loss of up to $1.28 billion due to costs associated with the start of production of the R1T.

Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co. — the same trio that lined up to take Tesla public — are leading the offering. The company’s shares will trade on the Nasdaq Global Select Market under the symbol RIVN.

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