Rivian Automotive’s blockbuster IPO makes it more valuable than Ford and GM

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Rivian Automotive’s blockbuster IPO makes it more valuable than Ford and GM

Shares of Rivian Automotive soared as much as 37% on their first day of trading in an auspicious stock market debut for the electric vehicle maker. In afternoon trading on the Nasdaq index the company’s valued swelled to $97 billion, greater than that of Ford, an investor in the startup, and of General Motors. 

Rivian, which is also backed by Amazon, said it will use the proceeds from the initial public offering to ramp up production of its trucks, vans and SUVs. The company recently sold its first electric pickup trucks and is the latest automaker to compete with Tesla in the emerging electric automative market. 

Rivian shares priced at $78 and were trading at $99 as of 2:48 Eastern time. The company’s splashy IPO is also noteworthy given that the company has so far delivered only about 150 of its electric pickup trucks to customers, mostly employees, and lost $1 billion in the first six months of this year. 

Rivian has some high-profile corporate backers: Ford held a 13% stake in Rivian coming into the offering and Amazon had a 20% stake.

Automakers big and small, new and old, are chasing Tesla, which has largely dominated the electric vehicle market for years, amassing a market value of more than $1 trillion along the way. So far this year, Tesla has sold around 627,300 vehicles.

Electric vehicles are “inevitable”

Craig Irwin, an analyst who covers electric vehicle and electric vehicle (EV) charging companies for Roth Capital, said that even with more companies entering the market, there is still plenty of room for newcomers.

“EVs are inevitable, and it’s a good thing for the markets to have another credible EV competitor come public,” Roth said. “Rivian’s IPO marks a point of incremental maturation for the industry and shows that billions in capital is available for credible players.”

Rivian could raise as much as $12 billion with the sale of 153 million shares, which would top the $8 billion Uber raised in its IPO in 2019. Rivian said it will use the money to ramp up production of its trucks, vans and SUVs. It’s the latest in what’s becoming a long line of companies trying to carve out some of Tesla’s dominant market share.

Tesla in October saw its market capitalization top $1 trillion, putting it in the company of tech powerhouses such as Apple, Amazon, Google and Microsoft. 

Rivian has a contract with Amazon to build 100,000 electric delivery vans at its factory, a former Mitsubishi plant in Normal, Illinois. Ford invested a half-billion dollars into Rivian in 2019 and said the companies would work jointly to develop electric vehicles.

As of October 31, Rivian had 55,400 vehicle preorders in the U.S. and Canada. Those orders are placed with a $1,000 deposit that can be canceled and refunded.

Rivian rolled out its first vehicle, the R1T electric truck in September and will launch its electric SUV, the R1S, in December. Prices for the truck start at $67,500, while the SUV base package starts at $75,500 and gets even steeper with all the add-ons.

Options for the vehicles include a $10,000 battery upgrade that will extend the driving range from 314 miles (505 kilometers) to more than 400 miles (643 kilometers). A three-person roof-mounted tent adds $2,650 to the bill and an off-road recovery kit will cost an additional $600.

Targeting Tesla shoppers

Rivian said it aims to produce about 1,200 R1Ts and 25 R1Ss and deliver around 1,000 R1Ts and 15 R1Ss by the end of 2021.

The R1T will compete with Ford’s F-150 Lightning electric pickup, which goes on sale next year. The Lightning has a starting price of $40,000, but will sell for thousands of dollars more once customers add options. General Motors has announced plans for an electric version of the Silverado pickup.

“Although the R1T’s advantage is that it’s first to market and it will likely appeal to a Tesla-type shopper, the long-term volume expectations for a $70,000+ midsize truck aren’t very high,” said Jessica Caldwell of the automotive website Edmunds in an email.

The research firm LMC Automotive said that in 2020 EVs made up a little more than 3% of the global auto market and less than 2% of the U.S. auto market. The group projects those numbers to shoot up to about 15% and 12%, respectively, by 2025.

Rivian, which was founded in 2009, says it lost $426 million in 2019 and $1 billion last year. It reported losing nearly another billion dollars in the first six months of this year. Tesla, which went public in 2010, recorded its first annual profit last year.