This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
Is Rivian’s IPO a Poisoned Chalice for Investors?
As Rivian broke the news of its impending IPO on Friday, Tesla’s (NASDAQ:TSLA) CEO, Elon Musk, fired the first shot across the proverbial bow of the company:
Don’t want to be unreasonable, but maybe they should be required to deliver at least one vehicle per billion dollars of valuation before the IPO?
— Elon Musk (@elonmusk) August 28, 2021
While R1T deliveries would commence in September, it is hard to conceive the company building any sizable momentum going into its IPO in October. Hence, the onslaught of apprehension from a few corners. At least, strictly speaking, Rivian would not be a pre-revenue company by that time; thank heaven for small mercies.
Nonetheless, I do believe that the company offers an attractive avenue for long-term investment. First, Rivian is one of the most well-capitalized private enterprises in the US, having raised $10.5 billion cumulatively by July 2021. Much of this funding is reportedly slated for a new $5 billion facility near Fort Worth, Texas. The sprawling 2,000-acre facility – dubbed Project Tera in Rivian’s internal documents – is expected to create 7,500 jobs by 2027 and feature a production capacity of around 200,000 units per annum.
In another bullish sign, Rivian appears to be following in the footsteps of Tesla by aiming for its own charging network – dubbed the Rivian Adventure Network – across North America. The network is expected to consist of around 3,500 DC chargers at over 600 locations in the US and Canada by 2023. While this strategy is quite capital-intensive, Rivian’s well-capitalized coffers mean that it is one of only a handful of companies that can successfully establish a sprawling charging network in a relatively short period.
Tesla’s Cybertruck and Ford’s electric F-150 offer formidable competition to the R1T. Moreover, making prototypes is easy. The real challenge lies in scaling up production. And it is here that Rivian’s mettle remains untested for now.
Given Rivian’s healthy prospects, I don’t believe that its flotation is a poisoned chalice for those investors willing to take a long-term view. In the short term though, the risk around Rivian shares would remain skewed to the downside.
