Rivian’s $ 80 million stock market valuation is at risk of electric shock

MELBOURNE, Aug 30 (Reuters Breakingviews) – Rivian Automotive has a good chance of becoming a successful battery-powered vehicle manufacturer. Since February 2019, the 12-year-old firm has convinced credible investors like Ford Motor (FN), BlackRock (BLK.N) and T. Rowe Price to deliver $ 10.5 billion between them to help develop its all-electric pickup truck. and SUVs. And it already has some revenue on the stock market, as another major sponsor, Amazon.com (AMZN.O), will buy 100,000 of its vans. Now chief executive RJ Scaringe has submitted his confidentiality for a first public offering. There is only one problem: a valuable potential valuation of $ 80 billion.

This is the figure that is talked about in the news. He’s just shy about tripling the value investors bring to the company in its January funding round. It requires some of the same optimism that has driven Tesla (TSLA.O) from Elon Musk, another electric vehicle specialist, to a market capitalization of more than $ 700 billion.

Rivian hasn’t published any issues publicly yet, but he probably won’t make any money. This is the case of Lucid Motors, which also began trading on the market, when it merged with a blank check company and has a market value of $ 34 billion. Led by Peter Rawlinson, a former chief engineer at Tesla, Lucid is quoted at 2.4 times its own revenue estimate for 2025.

Apply the same multiple to Rivian and it involves sales of $ 33 billion that year. This is possible, only. Scaringe’s company currently operates a factory with a capacity to produce 300,000 vehicles a year and is looking for a second to produce perhaps another 200,000. At an average price of $ 75,000, just above what it currently charges for orders, at full capacity Rivian would provide about $ 37 billion.

In other words, to justify a $ 80 billion valuation, Rivian is expected to generate nearly $ 4 billion in EBITDA by 2025. This is an approximate approximation based on the company’s average value to multiple EBITDA that uses Lucid’s own projections and Morgan Stanley’s estimate for Tesla. .

To get closer to either goal, Rivian has no room for delays or the kind of problems that created what Musk called “production hell” at Tesla (TSLA.O) and announced the launch of its first mass market car, the Model 3.

Musk, at least, had few competitors. Scaringe does not have this luxury. Ford, for example, already has 120,000 reserves for its electric F-150 truck. Tesla also has a pickup truck in the pipeline. Rivian’s IPO investors could be risking an electric shock.

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CONTEXT NEWS

– Rivian Automotive on Aug. 27 said it has submitted confidential documents to the U.S. Securities and Exchange Commission to prepare for a first public offering of its shares. The company is proposing a valuation of between $ 70 billion and $ 80 billion, Reuters reported.

– The company, which defines itself as a manufacturer of electric adventures, intends to start production this year of its first vehicles, the R1T van and the R1S SUV, with full production from 2022. Rivian also manufactures 100,000 electric vans. for Amazon.com and intends to have 10,000 on the road by 2022.

– Rivian has raised nearly $ 10.5 billion in funding since 2019. Amazon.com, BlackRock, Cox Automotive, Ford Motor and T. Rowe Price are among its investors.

Edited by Richard Beales and Marjorie Backman