Rivian Automotive: Wall Street embraces venture capital risk in the public markets

If anyone deserves credit for Rivian’s success it could be the two richest men in the world, Elon Musk and Jeff Bezos.

On Wednesday, the hyped electric truckmaker began trading after it sold $12bn of stock. Shares opened 37 per cent above the float price for a valuation of $93bn, according to Bloomberg data.

That looks incredibly high for any newly listed company. Even more shockingly, this company generated, according to its securities filings, perhaps $1m of revenue in its most recent quarter.

Bulls will no doubt bow to Musk. Tesla has surged to an equity value exceeding $1tn, showing that the improbable can happen: a start-up automaker can produce vehicles at scale. Optimists also owe a favour to Bezos. Amazon provided early capital to Rivian and became an important customer by ordering 100,000 trucks.

In a banner year for new listings, Rivian might have taken top prize. Other electric vehicle companies have used the special purpose acquisition company (Spac) process to share forward projections. A traditional IPO, like Rivian’s, does not allow for such flexibility. That leaves investors to rely on back-of-the-envelope estimates, along with the reputation of big backers, to accept venture capital-like risk.

Among EV start-ups that have listed this year, precedents are mixed. Lucid Motors, a luxury sedan maker backed by the government of Saudi Arabia, trades at four times its listing price. But the likes of Fisker, Lordstown Motors, and Nikola are well off their highs. With revenues so many years away, even small cash flow outlook changes can greatly affect present value calculations.

Tesla will make close to 1m vehicles in 2021. So far this year, Rivian has rolled a dozen off its assembly line. Investors will hope Rivian’s production acceleration matches that of its trucks. Musk occasionally quips sheepishly about his own company’s lofty valuation. He may now have a new target for his tweets.