Electric-truck maker Rivian went public Wednesday on the Nasdaq, opening at $106.75 per share after being priced at $78.
Four experts discuss what's next for the company.
Duncan Davidson, partner at Bullpen Capital, shares one major headwind for the company.
"If you look at how these things are priced, they're like 10 to 20 times sales. Next year Rivian's supposed to have run $8 billion in sales, so this actually means this pricing is not out of whack if they actually hit their production. That's the Achilles' heel. Tesla has had real difficulty scaling up over the years, and they had much more time than Rivian had to do it. But I think we're going to solve this problem pretty quickly. Look at the whole car industry. They're having problems with production now anyway because of chips and other friction in the supply chain."
Pete Najarian, co-founder of MarketRebellion.com, highlights its high-profile backers.
"I think what really excites me about this is Ford does have the investment. I think it's interesting that they decided to just do the investment and not use the technology. That's a little bit odd to me. But I still think obviously they sure made a great decision back in 2019. Now I'm looking at Amazon as well ... a 20% stake, and they're actually one of the folks that absolutely is part of this whole flow of orders and the 100,000 for these delivery vans. I think this is a great backstop, in my opinion, is the fact that Amazon has this investment. They've got their 20%. I don't assume by any stretch that Amazon has any kind of plans to get rid of that, so I think because of that, that's always going to be there, and who knows how that's going to play out over the next multiple years."
Venture capital reporter Eric Newcomer lays out one challenge for Rivian.
"It's a company that is producing cars that hasn't delivered many of them, promised like 1,000 this year, is waffling between whether it will generate zero or $1 million in revenue this year. It's a company that's losses are going to have to accelerate. Yes, it's going to raise a ton of money in this IPO given the pricing, but the amount of money the car companies spend is enormous. So building up the kind of scale requires excellent execution. There are lots of businesses where you can get really sucked into the story. But the problem with car companies is they have to deliver quarter after quarter on a fundamentally low-margin business that requires a lot of operational excellence, some of which you just have to learn over time even if you're the smartest new car company around. It just takes time to figure out the process, learn from your mistakes and deliver."
Dan Nathan, principal at Risk Reversal, discusses the valuation.
"It says so much about the market that we're in, in the stock market and crypto markets, that you could be anointed at the opening today [with a] $100 billion market cap essentially pre-revenue. I mean, listen, if you think about what the total addressable market is for EVs, you could say, 'Alright, well maybe we just fast-forwarded a little bit, we got rid of those first five years' ... the fits and the starts and all the palpitations of that, and that's what the market is saying. I don't blame the bankers and I don't blame the company. This one is on investors. The first indication on price was somewhere around $50 ... It's investors that are clamoring for this."