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📮The Sunday Newsletter archive

IPO Of The Year?

EV startup or more accurately giant, Rivian ($RIVN) is finally going public next week. It’s going to be the 6th largest US IPO of all time as it plans to raise about $10 billion. What gives investors such huge confidence? The company hasn’t sold a single car after all. Well, it’s all about its largest investor and customer, Amazon ($AMZN). 

As Amazon disclosed in a recent SEC filing, it owns about 20% of the EV company but it has also made a huge order for about 100K electric vans. We don’t know how much these vans cost but this order could be worth at least $4 billion 💰, according to estimates. Maybe even more important is the fact that this agreement will generate recurring revenue for Rivian for fleet management, such as software updates.


📫Originally posted as part of the Sunday Newsletter
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Commentary

It sounds crazy for an EV startup to be worth $65 billion out of the gate, which is Rivian’s expected valuation. We’ve seen other EV names such as Lordstown Motors ($RIDE) or Nikola ($NKLA) that promised a lot to investors but failed to deliver. Yet, in Rivian’s case, Amazon is the differentiator.

Since it’s a large investor in the company it wants Rivian to succeed. Unlike retail orders that are non-binding and can be canceled anytime, Amazon’s 100K order is pretty much guaranteed that will be delivered.

Beyond Amazon’s order that will bring in billions in revenue, Rivian has about 48K pre-orders for its first electric pickup and SUV which cost on average $70K each. These pre-orders are worth another $3.3 billion. Not to mention that after the IPO the company will have about $13 billion of cash on hand, which is enough money to start building its products.

While it’s definitely a risky name, Rivian has good chances of succeeding and capturing a significant market share in the SUV and pickup truck market. Its valuation reflects that optimistic scenario. Shares start trading on Wednesday.

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