Rivian: the next Tesla or over hyped?

Lessons from Rivian’s peers

If you wanted to gauge the market’s feelings towards the future of mobility, look no further than electric vehicle maker Rivian. The company surged on its Nasdaq debut, with an opening market value of more than $100bn, greater than Ford and General Motors.

Before deductions, Rivian will raise approximately $11.9bn, making it the biggest IPO haul for a US company since Facebook in May 2012.

Isn’t that a bit high for a car company that’s only produced 12 vans this year?

You’re not alone in thinking that. Indeed, our Lex team says the figure looks incredibly high for any newly listed company, let alone one that only generated $1m of revenue in its most recent quarter.

The immense investor appeal may come from their faith in the company’s backers, most importantly Amazon chief executive Jeff Bezos. Amazon’s endorsement of the electric-vehicle maker’s commercial potential sparked a flurry of other investors that even included Ford, despite Rivian competing with its own pick-up range.

These investors hope Rivian will become the next Tesla, but to get a true sense of its future, it’s worth looking at how other electric-vehicle companies have fared after their IPOs.

Rivian’s shares closed at $100.73 per share on Wednesday, 29 per cent higher than its IPO price, and it’s still climbing as we write this. But a surge in share price is not unheard of for electric-vehicle IPOs.

Tesla, along with Chinese carmakers Li Auto and XPeng, saw their share price increase more than 40 per cent on their first day of trading. Lucid Motors and Nio had more modest gains, but their share prices still closed 10 and 12 per cent higher than their IPO prices respectively.

How does this play out long term?

If you prove you can deliver, you will be rewarded. Lucid Motors’ share price was steady for ages, but spiked after it confirmed the first customer deliveries of its $169,000 Air Dream Edition sedan would begin. On Tuesday (two weeks on from that announcement) Lucid’s stock hit $47.53 a share — its highest point since the company went public through a Spac deal in July. If Rivian hits its 2025 deadline for delivering 100,000 trucks to Amazon, this could play out in a similar way.

Li Auto and XPeng’s share prices have fluctuated a bit more, not helped by the negative headlines coming out of China. Both companies notched up strong vehicle deliveries in recent quarters but they also face a lot of competition, not only against Tesla and China electric-vehicle peers, but established US automakers such as Ford, General Motors and Volkswagen.

Nio, whose market valuation reached $64.2bn, may not have turned a profit yet but it is riding on the wave that came with announcing three new electric-vehicle models (expected 2022) — with the share price hitting a high of $50 or more several times in the last year.

Tesla, of course, is still in a league of its own. In October it celebrated becoming the first carmaker to be valued at $1tn. While some still challenge if it can justify this price tag, it’s expected to deliver close to 1m vehicles in 2021 and has higher profit margins than its peers (at about 30 per cent only Ferrari compares). It’s also not just about the cars — Elon Musk’s company generates income from software services, charging, maintenance and insurance as well as sales of powertrains, batteries and carbon credits to other manufacturers.

Clearly, Rivian has a way to go. A key test will be when its 2023 exclusive deal with Amazon expires. For real growth, it will need to have more than one deal in the bag. One would hope that shouldn’t be hard, considering demand for electric vehicles is only going to increase.

The Internet of (Four) Things

1. Elon Musk offloads nearly $5bn in Tesla shares
Early indications suggest Elon’s sticking by his Twitter pledge to cash in 10 per cent of his stake in Tesla.

2. If you don’t have Netflix already, who are you?
Is America’s streaming market oversaturated? In a word, yes. We take a look at potential next moves for the streaming titans.

3. Music streaming: can ByteDance challenge Spotify and Apple?
The TikTok owner’s latest attempt to go global, with a music-streaming app designed for overseas markets, is showing some early signs of progress. It’s not yet thinking of launching Resso in the US, its strategy for taking emerging markets by storm first is worth a read.

4. Why Zillow couldn’t make algorithmic house pricing work
Zillow’s Zestimate of home values has become a go-to reference for US homeowners. But when Zillow tried to use its algorithm to buy and sell homes, it badly misread the market. Here’s where things went wrong.

Tech tools

Is this the Nespresso machine of matcha? The sleek white appliance turns the ancient, time-intensive art of preparing fresh matcha into something that can be done with the push of a button. Devised by two Japanese friends living in the US, the Cuzen Matcha Starter Kit ($369) produces shots of the antioxidant-rich green tea that you can then blend with milk, pour over ice or turn into other treats. Too bad it’s only available in the US currently.

Forwarded from Sifted — the European start-up week

Mariam Jimoh, a Londoner with Nigerian immigrant parents, used to work in investment banking, often clocking 17 or 18-hour days. It left her no choice but to order groceries online. But when she did, she found it hard to find the kinds of food that she was used to eating growing up.

To fill that gap, Jimoh has started Oja, a grocery delivery start-up aimed at immigrant and non-white British communities, which this week raised a $3.3m seed round led by LocalGlobe and supported by a host of angel investors, including Sharmadean Reid, founder of The Stack World, and Anton Soulier, founder of Taster.

It’s part of a wave of grocery start-ups that have emerged over the past year, with some offering food delivery in just 10 minutes and others catering to more niche tastes and audiences.

Elsewhere in European start-ups this week, Finnish food delivery company Wolt announced it has been acquired by the US food delivery company DoorDash for €7bn; buy now, pay later disrupter Zilch has become a unicorn after closing its Series C at a $2bn valuation less than a year after launching; and Spotify cofounder Daniel Ek’s investment company announced its first investment, backing British-German defence artificial intelligence company Helsing.