Rivian IPO, set to be 7th largest ever, could top high end of price range, report says

NEW YORK -- Electric truck-maker Rivian Automotive Inc. is guiding potential investors that its initial public offering is likely to price above the top of its marketed range, people with knowledge of the matter told Bloomberg.

Rivian is offering 135 million shares for $72 to $74 each in its listing, which could be the seventh biggest U.S. IPO on record. If the stock prices above the top marketed price of $74 per share, the company would raise more than $10 billion and exceed a fully diluted valuation of more than $70 billion.

That compares with a valuation of $27.6 billion after a $2.65 billion funding round in January, Bloomberg News reported.

No final decision has been made, and details may still change. A representative for Rivian declined to comment.

The offering is being led by Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co., with more than 20 banks listed on the cover page of its prospectus. Rivian shares are expected to begin trading Wednesday on the Nasdaq Global Select Market under the symbol RIVN.

Investors will be buying into the promise of a class of EVs that mirror the gas-powered vehicles that dominate the passenger market: larger, bulkier vans and pickup trucks that are a sharp contrast to Tesla’s sleeker sedans. The company also has Amazon.com Inc.’s backing – the internet giant owns a 20 percent stake in Rivian and has placed an order for 100,000 of its delivery vans.

As is the case with many richly valued startups, they’ll also be buying into ambitious growth plans. Rivian delivered its first vehicles just a couple of months ago and will only produce about 1,200 units by year-end at its plant in Normal, Ill. The company estimates that annual production will hit 150,000 vehicles at its main facility by late 2023.

While demand for Rivian’s products will likely outweigh supply for a number of years, the company faces a “natural ceiling” of 300,000 to 400,000 units per year, New Street Research analyst Pierre Ferragu wrote in a note Monday. That’s partly down to price: Rivian’s R1T truck starts at $67,500 for the most basic model, while its upcoming sport utility model is $70,000.

“Above $70,000, the global addressable market for Rivian’s SUV and pickup is less than 1.5 million units, and it will be a crowded space,” Ferragu wrote.

Stealth mode

Though it’s a newcomer to the public market, Irvine, California-based Rivian’s entry into the world of consumer EVs has been more than a decade in the making.

Founder and CEO R.J. Scaringe set-up the first iteration of what would become Rivian in 2009 in his home state of Florida.

Early work centered around a smaller sports car, which was later shelved in favor of a rugged pickup at the direction of early investor Mohammed Abdul Latif Jameel.

The company remained in stealth mode for almost 10 years, until the Los Angeles Auto Show in 2018 where Scaringe, who holds a doctorate from the Massachusetts Institute of Technology, showed his battery-electric pickup and SUV to the public for the first time.

With deliveries having finally started in September, Rivian is the first automaker to bring a battery-electric pickup to market in the U.S. It’s also on track to make the most of its first-mover advantage when it starts deliveries of the R1S sport utility vehicle this year, giving it a lead in the market for full-size battery-electric SUVs.

Competition, Amazon

When competition arrives, it will be plentiful -- and often cheaper. Ford Motor Co. has more than 160,000 non-binding reservations for its F-150 Lightning, the electrified version of its best-selling pickup that starts around $40,000, though it doesn’t go on sale until next spring.

General Motors, which walked away from potentially buying a stake in Rivian in 2019, will debut an EV pickup version of its iconic Hummer this fall. It also plans to unveil an EV version of the Silverado pickup at the CES in January.
 
Tesla, meanwhile, plans to start production on its futuristic Cybertruck pickup late next year at its new plant in Austin, Texas.

Much of the recent optimism around Rivian’s potential valuation comes from Amazon’s backing of the automaker, and particularly its order for 100,000 electric delivery vans by the end of the decade.

The deal for the vans is seen as a point of differentiation for Rivian, giving it some insulation from economic downturns that could hit consumer appetites for passenger EVs.

Scaringe has prioritized building hundreds of delivery vans this year, people familiar with the plan told Bloomberg News in October, even though Amazon is under no obligation to actually buy any of them.

Under the terms of the agreement, Amazon has exclusive rights to Rivian’s vans for a period of four years, with right of first refusal on all vans produced for another two years after that. Amazon is also permitted to work with other automakers on electric delivery vans.

‘Next Tesla’

“Rivian’s premium market valuation reflects its ownership of the entire value chain and freedom to innovate without dealing with stranded assets,” Pitchbook senior mobility analyst Asad Hussain said. “Between Rivian and Lucid, the market finally has credible candidates for ‘the next Tesla.’”

Elon Musk’s Tesla, which recently joined the trillion-dollar-valuation club, might have its own ideas about that.

A legal fight between the companies ramped up last month over Tesla’s claims that Rivian was poaching employees and, in the process, stealing “highly proprietary” battery technology. Rivian denied the claims, which it had accused Tesla in August 2020 of making up to stop employees leaving, and to stifle the growth of competitors.

If Rivian hits, or exceeds, the market valuation of $63 billion that it’s aiming for in its IPO -- excluding employee stock options and restricted stock units -- it would eclipse decades-old automakers such as Japan’s Honda Motor Co., valued at about $53 billion, and France’s Renault SA at $11 billion.

A first-day rally in the shares, which have characterized several recent IPOs by well-known companies, could see Rivian’s valuation top that of Ford, General Motors and fellow EV maker Lucid Group Inc., which went public via a blank-check company in July and is now worth about $74 billion. Rivian was last valued at $27.6 billion in a funding round in January, Bloomberg News reported.

Rivian plans to use the proceeds from its IPO for working capital, to fund growth and for other general corporate purposes, according to its listing paperwork. As well as ramping up hiring and increasing the volume of materials bought from its supply chain to meet demand, the company is also planning to build a second U.S. factory and is in talks with the city of Fort Worth, Texas, to invest $5 billion in a plant there. Rivian also is eyeing a third factory in Europe, Bloomberg reported in January.

The company posted a net loss of $994 million in the first six months of 2021, compared with a $377 million deficit a year earlier, according to its filings. It expects to record a quarterly net loss of up to $1.28 billion due to costs associated with the start of production of the R1T.