In the early days of Rivian’s (NASDAQ:RIVN) life as a publicly traded stock, there are a few factors that weigh heavily on its perception.
One is market capitalization relative to other automobile firms. The other is the establishment of more traditional reference points for price.
Most are aware that Rivian has had one of the more successful initial public offerings (IPO) in recent history with the Nov. 10 IPO, at $78 a share. But in the absence of more traditional analyst target prices, Main Street is scrambling to understand where RIVN stock will trade.
Given that Rivian is a new publicly traded entity, there’s little we can concretely guess regarding its price. The best we can do in these early days is note that the high water marks have been impressive, and that Rivian is still above water.
RIVN stock reached a closing high of $172 on Nov. 16, following its $100 close on its IPO date six days earlier. It has since declined, dropping to the $115 level this morning.
Yes, it’s still up roughly 15% from that first day, but what does that really mean to the market and investors?
I’d assert that it simply shows the pendulum has temporarily swung back in favor of two types of automotive manufacturers: Traditional car companies with growing EV presence, and more established, pure play EV manufacturers.
The major traditional car manufacturers including Toyota (NYSE:TM), Volkswagen (OTCMKTS:VWAGY) have all ahead of Rivian in terms of market cap. At least temporarily anyway. But so too has Chinese EV manufacturer BYD (NASDAQ:BYD). There isn’t much investors can garner from this news.
When RIVN stock traded at $172, it carried a market cap almost $150 billion that would put it in third place among all vehicle manufacturers, behind only Volkswagen and Tesla (NASDAQ:TSLA). Now it’s valued at roughly $102 billion.
Pundits can note little more than the fact that Rivian is a young force which will likely continue to trade above its IPO level. Once analysts begin coverage, investors will have a greater reference point. For now, everyone’s in the same boat of guessing at what price the market will tolerate. But it begs the question of when Wall Street coverage will begin.
Traditionally, Wall Street coverage of publicly traded entities begins approximately 1 month after IPOs occur. Brokers that participated in the IPO are prohibited from providing research for 25 days following the IPO. Brokers that did not participate are not barred from publishing research or initiating coverage within that same period.
Barron’s notes as much, with a caveat: “Brokers who aren’t part of the IPO can, of course, do whatever they like regarding coverage. But Rivian’s IPO was big. Brokers that played a role include Morgan Stanley, Goldman Sachs, J.P. Morgan, Barclays, Deutsche Bank, Wells Fargo, Piper Sandler, RBC, Baird, Wedbush, Loop Capital, and many others.” Therefore, the expectation is that coverage will begin around Dec. 6.
But for now, we know that Rivian is well-established and has already carved out a spot amongst the most valuable global automotive firms. Expect movement around that time to be significant.
Rivian is interesting for many reasons. It certainly reinforces the idea that EV stocks are the future. It also serves as greater reinforcement for traditional firms to continue to shift their product mixes more heavily toward EVs.
But it also raises important questions as Rivian will deliver roughly 1,000 vehicles this year and currently has almost no sales. Rivian has delivered vehicles to employees, but customer deliveries are in their infancy at best.
As interesting as RIVN stock is, there’s little reason to purchase now. There’s simply too much volatility. It’s also difficult to see how it could rise much higher given its market cap relative to sales figures.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing