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Rivian IPO: Overvalued Or Underestimated

Back in September we found out that Rivian, the upstart electric vehicle manufacturer backed by Amazon and Ford, was planning an Initial Public Offering come November. Rivian is set to IPO on Tuesday, November 9th, and not everyone thinks they are a good investment at the current price.

David Trainer, a contributor at Forbes, thinks Rivian is overpriced at its current valuation. He makes the point that just because a company is in a hot sector, in this case the EV industry, that does not make it a good investment. That was even after Rivian had reduced their valuation down from $80 billion to $52 billion. In the past several days, the fledgling automaker has increased that valuation to roughly $65 billion, which translates into $73 per share.

Rivian R1T
Source: Rivian

I can’t say that I disagree with Trainer’s skepticism. Rivian has only made 180 vehicles as of October 31st, and they are going to compete against Tesla, GM, BMW, and Ford in a market they are already lagging behind. We remember how difficult it was for Tesla to manufacture their product, and that was when there wasn’t a single other automaker making a compelling electric vehicle.

Rivian certainly has their work cut out for them. Trainer points out that “Rivian’s $52 billion valuation implies that Rivian will sell 2 million vehicles in 2030, or nearly 2.5 times the number of Tesla (TSLA) vehicles produced over the past 12 months and 66% more vehicles than Honda sold in the U.S. in 2020.”

Rivian R1T climbing a mountain
Source: Rivian

But let’s not forget the intangibles. Tesla is significantly overvalued for the amount of product they produce, yet the market still invests. Tesla also has Elon Musk. Rivian, as of right now, does not have an enigmatic figurehead to inspire the masses. Tesla also sold vehicles prior to their IPO, Rivian has not.

What Rivian does have is the backing of Amazon and a contract to produce their delivery vans. However, Trainer doesn’t think this or Ford’s investment comes close to justifying their sought valuation, as those were made at a much lower price. 

Here’s the thing, money is not just about the numbers. That’s Trainer’s problem, is he is just looking at the numbers. Don’t get me wrong, they make sense, but money is more psychology than math. How else do we explain the millions of people who knowingly get into debt every year? 

Rivian’s stock is not a numbers game. I fully expect people to invest way over what the math suggests is reasonable. Because, at the end of the day, Rivian is marketing a compelling, clean, and exciting adventure. Humans will ignore statistics completely if it means they get to be a part of something like that. 

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Car enthusiast and contributor for SwerveAutos