Rivian has the potential to be America’s next big electric vehicle manufacturer, possibly even the next Tesla. But, can you buy stock in Rivian?
Rivian could be the investment opportunity of a generation, and it could provide much-needed growth in a world of low-growth.
Investors (institutional and retail) are eagerly awaiting a potential IPO or funding opportunity.
Rivian is a newly founded automaker and technology automotive company. The company was launched in 2009, and they are devoted to transforming the transportation sector and leading sustainability.
Rivian has a very comprehensive landing page devoted to their core values, history, and mission statement.
“Rivian is an electric vehicle automaker and automotive technology company developing products and services related to sustainable transportation.
The company was founded in 2009 by CEO Robert ‘RJ’ Scaringe, who graduated from the Massachusetts Institute of Technology with a doctorate in mechanical engineering.
In 2015, Rivian opened research facilities in Michigan and the Bay Area. Rivian began working on electric vehicles and related products.
In January 2017, Rivian acquired the former Mitsubishi plant in Normal, IL, with the intention that the plant would become Rivian’s primary North American manufacturing location.
In November 2018 Rivian revealed its first two products: an electric five-passenger pickup truck named the R1T and an electric seven-passenger SUV named the R1S.
The company has stated that it will develop further products and related technologies in the near term.”
Future of Automobiles
I personally believe the future of transportation and automobiles is focused on electric vehicles and sustainability. Don’t just take my word for it though!
IEA published their own original research on the rapidly expanding EV market.
“Electric car deployment has been growing rapidly over the past ten years, with the global stock of electric passenger cars passing 5 million in 2018, an increase of 63% from the previous year.
Around 45% of electric cars on the road in 2018 were in China, a total of 2.3 million, compared to 39% in 2017. In comparison, Europe accounted for 24% of the global fleet, and the United States 22%.
The number of charging points worldwide was estimated to be approximately 5.2 million at the end of 2018, up 44% from the year before.
Most of this increase was in private charging points, accounting for more than 90% of the 1.6 million installations last year.”
Beyond organic customer demand, politicians will also provide a spark in promoting “cleaner”, reliable transportation. Nothing proves this more than the growth of subsidies, regulatory tax credit, and emissions.
Multiple western, developed countries now require various fuel economy standards and incentives for manufacturing zero (or low) emission vehicles.
This is to help bridge gaps in costs for manufacturers and consumers, and this helps make electric vehicles cost competitive with more “traditional” gasoline powered cars.
Policy support is being extended to address the strategic importance of the battery technology value chain and the transforming energy infrastructure.
For example, how are you going to fill-up your electric vehicle in the middle of Nebraska. Mix this with an additional gas tax issue; the gas tax funds road repairs, but it is not easy to levy on electric vehicles.
Profitability and Selling Credits
Rivian stock could have a fantastic upside that only renewable energy companies can seize, and this would be selling green tax credits.
Business Insider wrote a great piece on the hazy business of Tesla making money off these tax credits.
“Since 2012, Tesla has made more than $1.7 billion selling regulatory credits to other automakers.
The buyers of those credits, which purchase them to make up for shortfalls in their own zero-emissions vehicle sales, have previously been shrouded in secrecy.
However, Bloomberg news reported on Monday that both General Motors and Fiat Chrysler Automobiles (FCA) are two of the buyers, citing state filings in Delaware.
News of FCA’s credit buying in the US follows reports that the company said it would also pay hundreds of millions of euros in order to count Tesla’s electric vehicles among its own fleet.
Thus avoiding hefty fines from European Union regulators.”
Now, I have extremely mixed emotions about companies making billions in revenue off the back of American taxpayers, but I digress.
This controversial issue is one of the main reasons Tesla is not being currently included in the S&P 500 index because they would not be profitable without selling credits.
Consumer Demand and Carbon Tax
Bloomberg noted that it’s not just politicians demanding EV vehicle growth. ESG consumers are piling into a constrained supply market.
“Passenger EV sales jumped from 450,000 in 2015 to 2.1 million in 2019.
They will drop in 2020 before continuing to rise as battery prices fall, energy density improves, more charging infrastructure is built, and sales spread to new markets.
The electric share of total vehicle sales is still small, but it is rising fast. By 2040, over half of all passenger vehicles sold will be electric.
Markets like China and parts of Europe achieve much higher penetrations, but lower adoption in emerging markets reduces the global average.
Despite the rapid growth, there will be 1.4 billion passenger vehicles on the road in 2030 and EVs account for just 8% of these. This rises to 31% by 2040 as the fleet slowly changes over.”
For an additional tailwind, mainstream economists are very keen on the idea of a carbon tax. The consensus opinion is that the carbon tax is the most efficient way to reduce emissions.
This opinion ranges across the full spectrum of economists (from Paul Krugman to Milton Friedman).
Rivian Stock IPO
Taking a company public simply means the equity portion is traded on a public stock market exchange, and it provides original investors more liquidity.
There are many positive benefits of taking a company public, but it seems that’s not why most companies today are trying to IPO (Uber, Lyft and Chewy).
Historically, companies used IPO to raise more money from capital markets, so they could expand their core operations and scale their business.
Now, companies appear to be going public just for the sake of going public. Hint hint, this is exactly what happened during the 2000 internet boom.
Businesses with no customers, sales, or profits would go public because that was the only way to “cash-out” the initial investment. This made founders filthy rich, and retail investors were left with the bag.
Rivian management has teased potential investors that the company does eventually plan to “go public” in the near future.
Rivian Stock Price
CNBC has been on-top of the massive funding throughout the EV capital markets.
“As shares of electric truck maker Nikola Motor Co. surged at its IPO last month and cemented 38-year-old founder Trevor Milton as the industry’s newest billionaire, Robert “R.J.” Scaringe was quietly raising $2.5 billion in fresh financing for his electric truck company Rivian.
The company has raised about $6 billion in funding so far. Rivian closed on a $1.3 billion funding round in December and had raised at least $2.2 billion before that, Reuters reported at the time.”
Rivian is privately held, so they don’t have public financial statements. However, we can evaluate market multiples on their closest competitors (Tesla and Nikola).
Currently, Tesla and Nikola don’t have operating profits, so it’s tough to value the stock price from any traditional method.
We could theoretically use a precedent transactions approach (and based on share count outstanding). I would estimate Rivian’s stock to trade similar to Nikola.
Rivian Stock Alternatives
Rivian isn’t the only way to profit off the innovation of car manufacturing and surge in electric vehicle demand.
Here are a few of the other high growth EV companies, which could be a great diversifying option for any portfolio
- Virgin Galactic
Can You Buy Stock in Rivian?
Currently no, you cannot buy stock in Rivian, but you would be able to purchase shares in any future IPO. Based on share count, expect the price to range from $50-200.
Maybe there will even be investment potential in a Rivian auto dealership! Only time will tell.