Stock of the week - Rivian Automotive (18.11.2021)

• Rivian Automotive went public on November 10

• Shares gained 120% during the first 5 days before dropping 15%

• In spite of $0 revenue, company is fourth largest car manufacturer by market cap

• Larger cash burn than Tesla in its early days

• Backing from big-name companies

Rivian Automotive (RIVN.US), the US electric vehicles manufacturer, held an Initial Public Offering last week on Wednesday. IPO price was set at $78 per share but the stock rallied and closed at $100.73 per share during the first trading session. Stock continued to gain on the following days and emerged as the third largest carmaker in the world in terms of market cap, trailing Tesla and Toyota. However, this spot was lost yesterday after a big 15% share price drop. Let's take a closer look at the stock.

Impressive post-IPO rally

IPO of Rivian Automotive (RIVN.US) was a perfect example of of much hype surrounds EV stocks right now. Stock was initially priced at $57-62 per share but this range was later boosted to $72-74 per share. Ultimately, the IPO was priced at $78 per share, giving a company $66.5 billion valuation. Following an almost 30% rally, Rivian Automotive - company with no revenue - finished the first trading session with a valuation of over $85 billion. Rally continued in the following days with stock reaching a record high on Tuesday near $179 per share, almost 130% above IPO price, with a valuation of over $150 billion. At the close of session on Tuesday, Rivian was the third largest carmaker in terms of market cap, trailing only Tesla and Toyota. However, following a 15% drop on Wednesday, it has slipped below Volkswagen.

Comparison of car makers' market caps and 12-month sales. Tesla was omitted from comparison as massive trillion dollar valuation would distort comparisons among other companies. Source: Bloomberg, XTB

Rivian vs Tesla

As both companies operate as EV manufacturers and are surrounded by a lot of hype, Rivian is often compared to Tesla in its early days - a company with no revenue but with a promising future. However, there are some differences between the two. Tesla has started with sedan cars and has later branched into SUVs. Tesla also plans to start offering pick-ups. Meanwhile, Rivian has been focused on large electric vehicles, mainly pick-ups. Rivian also plans to start offering electric delivery vans for its current top shareholders - Amazon.

Rivian is burning cash just a Tesla used to in its beginner years. However, Rivian is doing it at a much quicker pace. Tesla went public in 2010 and in two years preceding its IPO it has spent a combined $93 million on research and development. Meanwhile, Rivian spent $1.4 billion on R&D in the two years preceding its IPO. Apart from that, Tesla generated $127 million in sales during that period while Rivian generated $0 in revenue during the past 2 years. Investments that Rivian is making are much bigger than the ones of Tesla but it should be noted that the company has a somewhat more optimistic outlook, mainly due to a massive 100,000 electric van order from Amazon.com. Still, Rivian manufactured less than 50 vehicles in its 10-year long history.

Comparison of Tesla and Rivian during IPOs. Source: Bloomberg, XTB

Backing from Amazon and Ford

Unlike Tesla, Rivian Automotive received support from various investors ahead of its IPO. Amazon.com is the company's biggest shareholder, owning almost 18% stake. E-commerce company looks for a close partnership with Rivian and a massive order for 100 thousand yet-to-be-built electric vans seems to confirm this. Ford Motor is another strategic partner with 11.5% stake and it was said that some of new Ford's EVs may be sold via Rivian's platform. However, no decision was made yet on this cooperation. T Rowe Price, Onyx Global Companies and Manheim Investments are financial investors in the company. Apart from the 5 mentioned entities, no other party holds a stake bigger than 1%. 

Top shareholders of Rivian Automotive. Source: Bloomberg, XTB

Share price of Rivian (RIVN.DE) traded in a steep upward channel during the first week following Initial Public Offering. Stock reached a record high near $179 per share on Tuesday. However, share price took a hit yesterday as initial hype waned and stock plunged 15%. It looks like stock has found a floor near $140 on Wednesday but today's pre-market quote points to an over-5% drop at the opening of the Wall Street session. Source: xStation5