Rivian IPO Filing Made This Skeptic (a Little) Less Skeptical

Rivian has filed to go public, so let’s take a closer look at the Rivian IPO filing.

The electric vehicle startup, funded by Amazon (NASDAQ:AMZN), Ford Motor (NYSE:F) and institutional investors, has filed an S-1 with the Securities and Exchange Commission (SEC). It’s not a SPAC, not a direct listing, not a Dutch auction. It’s a conventional IPO backed by the usual Wall Street suspects.

A hand touches a digital chart with the text "IPO."
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The document makes clear that Rivian plans to use its order for 100,000 Amazon delivery vans to make itself a player in electric pickups. The document has more than a dozen pictures of the truck in action and just three pictures of the delivery vehicle.

But the van is the cash flow that lets Rivian build the truck. Without it, you have a pre-revenue outfit that lost nearly $1 billion in the first half of the year. With it, you have a factory, an order book and well-funded plans to take on Tesla (NASDAQ:TSLA) directly, with a complete supply chain and services package.

Amazon’s Rivian Order

Rivian has watched how Tesla grew. Founder Robert Scaringe, known as RJ, is an MIT Ph.D. with high ideals and a passion for off-road vehicles.

By 2019, he had raised $1.7 billion to turn an old Mitsubishi plant in Normal, Ill., into a factory he says will do for electric trucks what Tesla did for sedans. The total pre-IPO investment is estimated at $10 billion.

But it’s the Amazon relationship that matters most. Amazon owns about one-quarter of the company, an investment of $1.8 billion. Then there’s the van order. These delivery vehicles will dominate Rivian’s early order book, giving production a free shake-down cruise.

When it comes to future profits, Ford may be more important, though. The R1T pickup looks like a Ford F-150. Ford has invested about $1.24 billion, winning orders for parts and tooling. Rivian claims to have 48,000 orders for the pickup and its R1S SUV. The company hopes to make 200,000 vehicles in 2023, which will more than fill that order book.

Rivian Aims for Complete Integration

For 40 years, the goal of most car companies has been to build many different vehicles off the same platform. Rivian does this. They also seek to control their supply chains. Rivian does this as well.

The company plans to build its own batteries, the key component of any electric vehicle. An electric motor has just one moving part. The battery is where the cost and value lie.

Like Tesla, Rivian also seeks to control the full value chain, including financing, servicing, charging and insuring its vehicles.

This is where electric car companies get their huge market caps. Car companies sell cars. Electric car companies control cash flow throughout a vehicle’s lifecycle, based on data collected while the cars are in use.

A Ford F-150 may cost $50,000. But it generates many times that amount in fuel, insurance and service. Rivian aims to capture all that, with a common platform for fleet vehicles and those sold to consumers.  That’s why Tesla is worth 20 times its sales. Rivian hopes to get $10,000 per vehicle, plus subscription revenue, for its autonomous driving option.

The Bottom Line

Before reading the SEC filing, I was a Rivian skeptic. I believed it was living on hopes and dreams.

I’m less skeptical now. My main concern is that electrics may be too good, and have too much software, for the industry’s long-term health.

PCs and phones become obsolete long before they break. Electric vehicles are going to be PCs on wheels. Your Rivian could be the last vehicle you ever own. The software of scaled electric vehicle fleets will take the steering wheel from your hand. Business models built for the gas-powered era won’t work in the long run. 

Rivian’s hope is that service revenue can compensate. But even Apple (NASDAQ:AAPL) depends heavily on new product sales, from people who already own the product. Will Rivian be able to say the same?

I don’t know, but that’s a question for another day.

On the date of publication, Dana Blankenhorn held long positions in AMZN and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.

Article printed from InvestorPlace Media, https://investorplace.com/2021/10/rivian-ipo-filing-made-this-skeptic-a-little-less-skeptical/.

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