William John Market Report 11-11-21
Rivian Automotive raises over $11 billion from its IPO - the largest equity fundraiser for a US company since Facebook’s flotation in 2012 - William John observes.
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William John Market Report 11-11-21

William John Market Report 11-11-21

Category: Reports

Following the IPO of Volvo Cars on the Nasdaq Nordic exchange a few months ago and impending SPAC merger between Gores Guggenheim and Polestar (A partially Volvo-owned electric vehicle maker) – further movement has occurred in the equity capital markets within the electrified vehicle industry. 

On 10/11, a company called Rivian (NASDAQ: RIVN), went public on the Nasdaq stock exchange with an issuance of 153 million ‘Class A’ common shares at a public offering price of $78.00 per share, including 30-day options for an additional 22.95 million shares at the public offering price (less underwriting discounts and commissions) for the underwriters of the deal, which included Morgan Stanley, Goldman Sachs, and J.P. Morgan. Looking at Rivian’s opening day performance:

Source: William John Analytics, Yahoo Finance

The company’s stock closed 28.2% higher than its opening offering price at $100.73, giving the company a total valuation of approximately $98.6 billion (979 million shares outstanding per Yahoo Finance). This opening market value is greater than that of Ford, General Motors, Honda, Nissan, Volvo and many more manufacturers. Comparing 2020 Net Operating Cash Flow and Market Capitalisations of some of these companies:

Source: William John Analytics, Wall Street Journal, Securities Exchange Commission
Foreign Exchange Rate: $1: 114.05 JPY

Observing the graph, Rivian appears to have the highest valuation amongst a collection of major car companies despite recording negative “Core Earnings” in 2020 at -$982 million and making “no actual vehicle sales”, according to Forbes. 

The total capital raised will be around $11.9 billion – the largest tap in the equity capital markets for a US-based company since Facebook’s flotation in 2012, which raised $16 billion. The company has major backers including Amazon and Ford (who may now consider themselves a rival). Their stakes are estimated to be valued at $12.5 billion and $8 billion respectively. 

Investors are likely to be so bullish on the company (despite limited evidence of significant financial performance) given the way the market for cars is going and the increasing demand for electrification and electric vehicles in general, paving the way for more established companies such as Tesla achieving trillion-dollar valuations. 

Whilst the company has over 50,000 pre orders for its sport utility vehicle and pick-up truck, as well as an order from Amazon for over 100,000 units of its commercial delivery vehicle, the company will have to ramp up its capacity, production, and sales aggressively over the coming years. If it can do this, the company may reach the stratospheric heights of contemporaries such as Tesla and join a new wave of automotive giants. If not, the company could face a significant market correction. Either way, Rivian has a long road ahead to justify its valuation.  

Any opinions expressed in these documents are those of William John and are provided for information only. E&OE.