Is Rivian’s (RIVN) IPO about to Mark the EV Sector’s Top? [Updated]

Is Rivian'south (RIVN) IPO about to Mark the EV Sector'south Superlative? [Updated]

Rivian (RIVN), the EV manufacturer that enjoys bankroll from Amazon and Ford, is in the limelight among financial analysts and investors today equally it gears upwardly for its much-anticipated public flotation.

However, given the subpar debut performances of almost IPOs over the past couple of months, some investors are worried that Rivian's public flotation might open up the doors for a wider correction in the frothy EV sector. Let'south disassemble.

Rivian (RIVN) Is about to Undergo 1 of the Most Predictable IPOs of 2021

Amazon had invested $700 million in Rivian back in September 2019. As office of the arrangement announced at the fourth dimension, Rivian is slated to provide 100,000 electric delivery vans to Amazon through 2030, with the first 10,000 vans expected to hit the road by 2022. These vans would play an important function in the e-commerce behemothic's strategy to become carbon neutral past 2040 and will feature a range of effectually 200 miles per accuse. Moreover, by 2023, Rivian likewise plans to start delivering these vans to non-Amazon customers also.

Rivian is also slated to evangelize its R1T electric truck and the R1S SUV soon. Withal, even though the company commenced the production of the R1T truck dorsum in September, it has yet to deliver the vehicle en masse amid assembly line bottlenecks. Reports at present propose that the mass deliveries of the R1T will now likely take place in 2022, with Rivian only managing to manufacture around 2 trucks per twenty-four hour period currently, equating to a total of around 56 equally of October 2021. Acquit in heed that Rivian currently has 55,400 fully refundable pre-orders for the R1T and R1S backlogged until 2023.

Every bit a refresher, both the R1T truck and the R1S SUV share the same basic compages as that of the Amazon delivery van, thereby creating substantial price-saving synergies in the process. The R1T is expected to offset retailing at around $67,500, a price tag that commands a hefty premium relative to the Ford F-150 Lightning electric pickup truck. Rivian's truck will offer a range of most 400 miles and an acceleration from 0-threescore mph in 3 seconds. As far as the R1S is concerned, the SUV will command a base of operations cost of around $seventy,000. Moreover, the EV manufacturer aims to introduce this SUV in Europe as well in 2022, thereby tapping another vibrant EV market.

Rivian's Illinois plant, a retooled Mitsubishi Motors factory, will accept the chapters to produce around 150,000 units annually by 2023. Of class, the company is too looking to invest $v billion in a sprawling 2,000-acre facility – dubbed Project Tera in Rivian'south internal documents. However, this new facility will reportedly feature a product capacity of 200,000 units annually. This ways that Rivian would be able to produce around 350,000 units annually at max capacity for the foreseeable future.

Source: https://twitter.com/TheSpacShack

Coming back to the IPO, Rivian is pricing its IPO at $78 per share, thereby resulting in a targeted valuation of around $77 billion. The company has also expanded the size of the offer to 153 million shares from the earlier marketed 135 meg shares. While in that location is clear investor interest in the IPO, some investors remain wary of the now-customary post-IPO selloff on the twenty-four hours of the public flotation, with Coinbase being the perfect illustration for this surly scenario. Moreover, given Rivian'due south ongoing production bottlenecks, some investors continue to question the legitimacy of its stratospheric valuation.

Is the Visitor About To Mark the Top for the EV Sector?

This brings us to the crux of the thing. Over the by decade, certain segments of the broader marketplace did emerge as retail favorites but lost their luster following the IPO of prominent names within those sectors. The rationale here is quite simple. Cognizant of the effervescent nature of these temporal bubbles, beneficiary companies rush to enhance new capital letter at elevated prices. Even so, in these conditions, IPO promoters and investment banks don't normally leave anything on the table for retail investors equally these institutions gun for lofty valuations. Since the stock marketplace is supposed to discount future growth, these sky-loftier valuations are unsustainable, thereby precipitating a crash and tanking the sentiment in the sector. Is something similar in store for Rivian? Allow's delve deeper.

Glencore, an Anglo-Swiss multinational commodity trading and mining company, managed to IPO dorsum in 2011 amongst a historic nail in commodity prices. Interestingly, the IPO marked the meridian for the article nail, with crude, gold, and copper all inbound a bear market soon after. In a similar mode, the public flotation of Coinbase in April 2021 marked the top for cryptocurrencies, with a brutal behave marketplace following thereafter during the "summer doldrums". Of course, detractors would argue that in each instance, sure intrinsic elements played a crucial role in spurring a price crash. Even so, the overall correlation still holds truthful.

There is, nevertheless, a mitigating factor for Rivian and the broader EV market place: the plethora of EV-related incentives canonical by the US House of Representatives concluding calendar week. As a refresher, these incentives include $7.v billion to encourage the establishment of EV charging networks likewise every bit tax credits of up to $12,500 for eligible electrical vehicles. While Rivian'southward R1T and R1S models won't qualify for some of the enhanced EV tax credits, the incentives have, nonetheless, revitalized a high-momentum sector, with a broad-based rally now post-obit suit. In this surroundings, Rivian might just manage to ride the coattails of the rally in the wider EV sphere, thereby fugitive the dreaded post-IPO fall. But and so again, the specter of Elon Musk selling a sizable proportion of his Tesla stake might ruin the political party for the rest of the EV players as well. After all, Tesla shares are now down over 16 percentage relative to the close on Friday.

Update: Rivian Shares Have Now Commenced Trading

EV MAKER RIVIAN AUTOMOTIVE INC CLASS A SHARES OPEN AT $106.75 IN DEBUT ON NASDAQ VS IPO PRICE OF $78/SHARE

— *Walter Bloomberg (@DeItaone) November 10, 2021

Rivian shares accept commenced trading at $106.75 per share, respective to a market capitalization of $93.3 billion. Carry in listen that the IPO was priced at $78/share.