Rivian IPO: Too Expensive Or A Better, More Focused Tesla?

One of our longer running themes has been that 2021 and especially 2022 will be the year of the electric pickup and, more broadly, the year where electric vehicles go mainstream across the US - not just the coasts.

We introduced this theme and chatted about one of the more exciting American made offerings - the Polestar 3 - way back in Pebble 5.

If you missed it, we have published it on our blog found here.

It is a great story and the name will likely re-emerge as new brands and new types of vehicles start to suddenly populate our roads.

This edition we are focusing on a different company: Rivian.

There are two big Rivian headlines at present and we were asked about the second one, in particular:

1) Their R1T pickup is finally being released this month and reviews are coming in fast and heavy.

2) The company has filed for an IPO and has quoted an incredible $80 billion (!) valuation. (that is easily more than Ford's or GM's)

That is quite a sum for an unprofitable company that has yet to deliver a vehicle and does not even have any revenues to go on yet.

Some of the other issues might be:

Their financial projections depends on zero delays. Musk famously described manufacturing a car as "production hell" and Rivian has already delayed the release date once.

Unlike when Musk was largely competing with himself there is now a welcome increase in competition! Ford, Polestar, Tesla, GM (Hummer) etc.

The price is STEEP. The Launch Edition starts at $73K+ which is not for the faint of heart even at the time of runaway car inflation and for an amazingly high tech vehicle that will save on repair bills and eliminate trips to the gas station.

However, there is some positive news as well:

The first and most important is that early reviews have been stellar. MotorTrend entitled their review: The 2021 Rivian R1T Is The Most Remarkable Pickup We've Ever Driven.

That is hype you simply cannot buy.

They also have a first mover advantage - albeit a narrow one. Other companies are hot on their heels but Rivian will be the first to produce a mass market electric pickup and people seem to love it. They have sold out the first production run.

Somewhat justifiably therefore, people are excited and asking: should I get involved? What should we watch?

The key factor to watch may be additional delays or further production problems. If the new Rivian vehicles have glitches or if the wider company cannot keep to their schedule then it will likely be a company to avoid at such a high valuation.

Based on Tesla (and other companies' experiences) those issues seem more likely than not.

The other element to monitor is if they actually list themselves at a $70-80 billion dollar valuation. Doing a like for like comparison with another electric car maker - Lucid - it would seem that a more sensible valuation would be around half that.

In conclusion, there is lots of hype around these companies and as Tesla's rise has proven, it is possible to over promise and over deliver when you are producing cool new products that make people sit up and say "wow!"

However, the idea that every car company will be able to follow the Tesla trajectory seems pretty unlikely. Rivian might be more of a "wait and see" than a "IPO darling."

Whether it flies or flops, you should be careful about getting involved and risking becoming collateral damage.


Have questions? Care to find out more? Feel free to reach out at contact@pebble.finance or join our Slack community to meet more like-minded individuals and see what we are talking about today. All are welcome.


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