The Offering

Company Overview

Rivian Automotive designs, develops, and manufactures category defining EVs and accessories. The company markets the products directly to its customers in both the consumer and commercial space. The company has launched the R1 platform with their first generation of consumer vehicle. Initially the company launched its R1T, a two-row five-passenger pickup truck. Next it plans to launch the R1S, a three-row seven-passenger SUV, in December 2021. In commercial market, the company will launch the Rivian Commercial Vehicle (RCV) platform with their first vehicle- Electric Delivery Van (EDV). This vehicle has been designed and engineered by Rivian in collaboration with Amazon.

Source: Company Website

Key Highlights

• Revenue Engines: The company expects to generate the majority of its revenue in the near-term from the sales of consumer and commercial vehicles, accessories, and regulatory credits.

• Net proceeds: The company expects to receive net proceeds of approximately $9,722 million or $11,182 million, given that the underwriters exercise their option to purchase additional shares in full at the assumed midpoint of the IPO price of $73.00 per share.

• Use of Proceeds: The key motive behind this offering is to increase the company’s capitalization and financial flexibility. The company intends to use the net proceeds for working capital to fund growth and other general corporate purposes, including research and development, sales and general administrative matters and capital expenditures. Also, the company might use a portion of the net proceeds to acquire or make investments in businesses, products, offerings, and technologies.

• Top Shareholders: Top five shareholders of Rivian together hold approximately 77% Class A shares of the company. Amazon.com NV Investment Holdings LLC is the major shareholder in Rivian, holding ~22.4% stake. The Founder & CEO of Rivian, Robert J. Scaringe, holds 1.4% of Class A shares and 100% of Class B shares. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes.

Source: Company Prospectus 

• Dividend Policy: The company has never declared or paid any cash dividends. Also, it does not anticipate declaring or paying any dividends in the foreseeable future.

• High Debt, Higher Balance Sheet risk: As of June 30, 2021, the company has total outstanding debt of $3.0 million. After June 30, 2021, the company has issued, a) $2.5 billion aggregate principal amount of 2021 Convertible Notes in July 2021, which is expected to be converted into Class A common stock in connection with this offering in accordance with their terms, and b) $1.25 billion aggregate principal amount of 2026 Notes in October 2021, which will remain outstanding following this offering.

• Industry Tailwinds: Shifting consumer preferences and targeted regulatory support, is contributing to the robust demand for EV. Also, trucks and SUVs comprise over 70% of new vehicle sales in the United States and account for most of the profits generated by incumbent automobile manufacturers.

• Secured 100,000 Electric Delivery Van order from Amazon: Amazon has given an order for 100,000 EDVs, representing the largest order of EVs ever. The company is targeting to deliver 100,000 EDVs to Amazon by 2025.

Source: Company Prospectus

• Preorders: Rivian had about 55,400 R1T and R1S preorders as of October 30, 2021 in the United States and Canada.

Financial Highlights

Source: Company Prospectus

• The company’s operating expenses have increased from US$110 million to US$580 million over the past eight quarters. The steady increase in operating expenses reflects the continued advances in development of the R1T, R1S, and EDV vehicle programs.

• Losses from operations during the Q2FY21 stood at US$580 million, as the company has not yet reported any topline numbers and operating expenses has gone up on sequential quarter basis.

• Net losses for Q2FY21 stood at US$580 million increased from US$200 million losses reported in Q2FY20.

• As of June 2021, the company’s cash and cash equivalents stood at US$3,658 million, primarily through net proceeds from the sale of securities and from borrowings.

Key Management Highlights

Source: Company prospectus

Risk Associated (High)

Investment in the IPO of “RIVN” is exposed to a variety of risks such as:

• Growth stage company: Rivian is a growth stage company with a history of losses. It expects to incur significant expenses and continuous losses for the foreseeable future, even after their initial generation of revenues from the sale of vehicles.
• Intense competition: There is intense competition in the EV segment with several established players exploring this space.
• Roaring inflationary pressure: The prices of the underlying metals and commodities (including Lithium, Steel, Copper, Nickel, Glycol and others) used in EV manufacturing have gone through the roof, which is suppressing the margin profile of these companies significantly, amid times when these companies are still not reporting any accounting profit.
• Other Risks: Other risks include shortage of semi-conductors, supply chain related risk, resurgence in COVID-19 cases, decline in the purchasing power of customers, interest rate risk, forex risk and other macroeconomic risks.

Conclusion

Rivian Automotive Inc, backed by Amazon.com Inc and Ford Motor Co, is targeting a valuation of nearly $65 billion in its initial public offering in the United States. The company is investing aggressively to ramp up its production and has a good order book, including the 100,000 Electric Delivery Van order from Amazon.

However, Rivian is a growth stage company with a history of losses and expects to incur significant expenses and continuous losses for the foreseeable future. Also, the company would witness steep competition from automakers in both the consumer and commercial van markets.

Therefore, the IPO of Rivian Automotive, Inc. would be “Attractive’ only for High-Risk appetite investors.

---

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.