Shareholder group calls on Rivian to have better oversight of environmental, human rights protections
Rivian Automotive Inc. ended its first day as a public company valued at almost US$88 billion, more than tripling its last private valuation after investors piled into 2021’s biggest initial public offering.
That puts the electric truck maker on par with General Motors Co. and makes it more valuable than Ford Motor Co., one of its top investors, as well as EV rival Lucid Group Inc. On a fully diluted basis, including options and restricted stock units, the Irvine, California-based company is valued at about US$98 billion.
That compares with Rivian’s valuation of US$27.6 billion after a US$2.65 billion funding round in January, Bloomberg News previously reported.
Backed by deep-pocketed companies such as Amazon.com Inc. and Ford, Rivian sold 153 million shares Tuesday for US$78 each after marketing 135 million for US$72 to US$74, a range it had earlier elevated from US$57 to US$62. The company’s almost US$12 billion IPO is the biggest globally this year, and the sixth-largest ever on a U.S. exchange, according to data compiled by Bloomberg.
Rivian’s shares, which rose as much as 53 per cent Wednesday to briefly push the company’s market value to US$104 billion, closed at US$100.73, up 29 per cent from the IPO price.
Rivian is looking to make a dent in the electric vehicle industry led by Tesla Inc., which has a market value of almost US$1.1 trillion after its shares have gained 52 per cent this year.
R.J. Scaringe, Rivian’s founder and chief executive officer, said in a Bloomberg TV interview Wednesday that the company’s biggest challenge is the “health of the supply chain” as it ramps up production amid parts shortages.
ABILITY TO SCALE
The company’s valuation reflects the company’s ability to scale quickly and its plan to build commercial vehicles, Scaringe said. That starts with 100,000 battery-electric delivery vans for Amazon, which Scaringe described as an “initial order.”
In addition to consumer EVs, Tesla has also built out a strong and growing energy-storage business including solar, home and commercial energy storage. Scaringe indicated that Rivian is looking at expanding in similar lines of business.
“For us, it’s a question of how do we, as rapidly as possible, transition ourselves away from a fossil-fuel based economy?” Scaringe said. “And that of course has a huge focus on the transportation products. But it also includes energy products. And this is something that we will certainly get into as we really try to accelerate that.”
The hunger for environmentally friendly stocks is also seen as contributing to the IPO’s success.
Rivian set aside 0.4 per cent of its IPO shares for users of SoFi Technologies Inc.’s trading platform, letting them invest at the offer price of US$78 before public trading started. While that’s a small portion of the overall deal, retail investors have proved their ability to prop up stocks they believe in, and many are devotees of EV names such as Tesla and Lucid.
Mutual funds are also facing pressure to build positions in Rivian to mirror the index funds that will likely include it. Also, funds with ESG mandates are hunting for exposure to an EV maker other than Tesla.
“The Rivian IPO was a huge success, so people are reading this as bullish for the sector,” Craig Irwin of Roth Capital Partners said in an interview. “Institutions had to drive that valuation with a US$12 billion cash haul.”
Rising fuel prices may have contributed to interest in Rivian’s shares. The price of gasoline has jumped 62 per cent in the past year to US$3.42 a gallon, according to the American Automobile Association.
“Oil prices have a direct impact on the economic payback period of EVs, influencing desirability and penetration,” Adam Jonas, an analyst for Morgan Stanley, wrote in a note this month. “The recent increase in oil prices significantly improves the payback math for EVs.”
Just a couple of months ago, Rivian delivered its first vehicles, mostly to its own employees. It will only produce about 1,200 units by year-end at its plant in Normal, Illinois. The company, which lost almost US$1 billion in the first half of the year, estimates that annual production will hit 150,000 vehicles at its main facility by late 2023.
Rivian’s IPO was 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 trading on the Nasdaq Global Select Market under the symbol RIVN.