The IPO was the largest in the United States since 2014, and
even before its debut, Rivian had raised $11.9 billion in financing.
In its first day of trading, shares in the company backed by
Amazon and Ford leapt as high as 50 percent, taking Rivian's market
capitalization to more than $100 billion, if stock options and other
convertible shares are taken into account.
That was above General Motors and Ford itself, even though
those companies produce millions of cars each year whereas Rivian is expected
to deliver only 1,000 by the end of 2021, and has yet to make a profit.
The promising stock market debut has attracted comparisons
between Rivian and Tesla, Elon Musk's electric vehicle phenomenon that recently
passed the symbolic $1 trillion valuation mark.
Yet the road ahead for Rivian may indeed be bumpy. Fellow
electric car start-ups Nikola, Canoo, Lordstown Motors, and Fisker all saw
their shares peak when they went public in 2020, before falling back heavily.
Lucid and China's XPeng have seen more stable share prices.
Tesla's experience may be most instructive. While its shares
are valued around $1,077 today, they were worth $6 just 10 years ago.
Scaling up
The rising interest in electric cars comes as investors
sensitive to environmental or social issues increase demand for green
companies.
Adding to the positive sentiment are moves by Washington to
increase the availability of electric vehicle charging stations and encourage
people to switch from fossil-fuel burning cars.
The electric vehicle sector remains tiny, comprising just
three percent of all sales in the United States, yet it has benefited from this
attention, which has not escaped the notice of traditional automakers.
"When General Motors says that by 2035 all of its cars
will be electric, the hope for a rapid electrification of the sector is
enormous," said Gregori Volokhine, president of Meeschaert Financial
Services.
For GM chief executive Mary Barra, the astronomical
valuations of electric vehicle startups that have sold little to no cars shows
that her company, which has planned to invest more than $35 billion in electric
and autonomous vehicles by 2025, is "so undervalued."
"If anything, it motivates me to work even
harder," she said at a conference Wednesday.
The Detroit automakers' transition to electric fleets will
take time, while with Rivian, "investors have a pure electric player on
hand," Volokhine said.
Excellent entourage
Also helping Rivian's case is that founder Robert Scaringe,
a car enthusiast who started the company right out of school, "chose
wisely on his executive team," which is stacked with auto industry
connoisseurs, said Karl Brauer, an analyst at iseecars.com.
From their design to their interiors and options, Rivian's
products are convincing, said Brauer, who was able to test the company's R1T
pickup truck himself.
The model's high price of at least $67,500 should not
prevent it from finding its audience, just as Tesla has been able to target the
high-end market, Brauer said.
Perhaps most important for Rivian are its partnerships with
Ford and Amazon.
In addition to owning about a fifth of the company, Amazon
has placed an order for 100,000 of the company's delivery vans by 2030.
Ford, meanwhile, owns about 12 percent of Rivian's stock and
has a vested interest in its growth.
With after-sales maintenance usually a weak point of auto
start-ups, "Ford could come out with a statement in the next two months to
two years saying there are going to have dedicated dealers that will also be
fully capable of servicing the Rivians," Brauer said.
To Jay Ritter, an IPO specialist at the University of
Florida, the enthusiasm of investors who have paid so much for a company that
has thus far delivered so little is "surprising."
But he said that with the money raised, Rivian will be able
to hire engineers and increase production, bringing it closer to markets' lofty
expectations.
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