This years record setting IPO market will take center stage today, Wednesday morning, when electric vehicle (EV) startup Rivian Automotive (RIVN) makes its highly-anticipated debut. The EV market’s rapidly moving from a state of reluctant consumer acceptance to the verge of transforming the entire auto industry.

RIVN's 135.0 mln share deal is drawing massive amounts of interest. This enthusiasm was on full display last Friday when the company boosted the expected IPO price range to $72-$74 from $57-$62. Today the company is set to go public at $78/share.

This upward revision suggests that RIVN would command a market cap of nearly $70bln! This is more than a $43 bln increase from its private market valuation. RIVN will be valued more than Ford Motors (F) and General Motors (GM). For a company that has yet to generate any meaningful revenue, that's ridiculous.

UPDATE: RIVN Indicated to open above $100 at this time.

It’s important to mention that high profile IPO’s don't always turn out to be highly successful ones. You only need to look back to the disappointing IPOs of Robinhood Markets (HOOD), Didi Global (DIDI), and Coinbase (COIN), to find a few references of highly anticipated deals that fizzled out.

This is not a suggestion that RIVN will follow the same track as those three IPOs. Just a common understanding that more often than not it’s a wise decision to let the dust settle a bit before taking a position in a hyped deal like this one. Early investors who just saw their holding skyrocket in value tend to take some profits, creating volatility during the first day(s) of trading.

SPECS:

To be sure, there is plenty of reason to be excited about this IPO. Rivian’s EVs, which will initially include a pickup truck called R1T, and an SUV called R1S, are attractive, but also rugged, and are loaded with technology. For instance, both models are equipped with Driver+, RIVN's advanced driver assistance system (ADAS), as well as with a digital user experience management system that's updated through its cloud-enabled over-the-air platform.

Demand has been strong, as shown by RIVN's pre-order backlog of 55,400 R1 vehicles. The company's main manufacturing facility in Normal, IL, is just now beginning to ramp up production. As of October 31, 2021, RIVN produced 180 R1Ts, up from just 12 one month earlier. Once vehicle validation and testing requirements are completed this December, the company plans to launch production of its R1S. RIVN's production goals for FY21 are fairly modest at 1,200 R1Ts and 25 R1Ss, but its facility is currently equipped to handle 150,000 vehicles annually.

What’s noteworthy is that most of the initial vehicles produced at the Normal plant won't be from RIVN's R1 platform. Why is this noteworthy? Well, because the company signed an agreement with Amazon (AMZN), which owns a 20% stake in RIVN, to deliver 100,000 last-mile delivery vans to the eCommerce giant. RIVN is aiming to produce 1,710 commercial vehicles per week, representing RCV (Rivian Commercial Vehicle) platform capacity of about 85,000 units annually. 

Being backed by AMZN as both a customer and as an investor certainly gives this company some muscle. It doesn’t stop there though. Ford, which will compete directly against RIVN in the pickup market with its F-150 Lightning, is also a major RIVN shareholder.

According to the IPO prospectus, Ford holds a 14.4% stake in the company. These relationships show how these auto makers have a vested interest in driving the broader EV market higher. In other words, a bigger overall pie is good for every OEM. The most interesting thing about the AMZN and F relationship however is that it creates a similar effect on RIVN that TSLA gets from Elon Musk holding a sizable stake in the company. Assuming that both F and AMZN will be long term investors in RIVN, this creates a bottleneck on the share count.

FUNDAMENTALS:

RIVN's financials aren't much to look at right now. This is without a double a growth story For the six months ended June 30, 2021, the company recorded no revenue and had an operating loss of $(990)mln. That was a significantly steeper loss than the $(381)mln loss it registered in the year-earlier period. Again, for most investors, this is a story rooted all around growth so these current numbers shouldn't be a major factor as it relates to the IPO's performance.

Most investors will look at TSLA and its $1.1 trillion market cap as a model for what RIVN could become. With that, RIVN has a long road ahead to make inroads on TSLA and the EV space is becoming increasingly crowded and more competitive. There's no guarantee for success and it took many years for TSLA to profitably produce EVs.

The fact that RIVN is backed by behemoths like AMZN and F makes me believe the company has an pivotal edge that will help it acquire market share. As long as this company continues to grow investors should continue to be rewarded. Fundamentals will be discounted and will take some time to round into shape.

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