Here come all the “Is Rivian the new Tesla?” folks…
On Friday, August 27th, Rivian submitted its registration with the Securities and Exchange Commission (SEC) to take the company public. If you’re a car guy and not a Wall Street suit, that basically means Rivian is looking to sell shares, little pieces of its company, to people like you and me. Or more accurately, people who already own other stocks and don’t have a project car in the garage that they’ll “finish this summer”.
Valuation is not the same as value
According to sources at Bloomberg, Rivian is eyeing an $80 billion valuation for their Initial Public Offering (IPO) sometime in November. Here’s the thing: valuation is not the same as value, and it is certainly not the same as profits.
Rivian is just now ready to begin production of its R1T pickup this month and the R1S SUV isn’t slated for assembly until next year. How can a company who hasn’t sold any consumer products seek a valuation of $80 billion? Well, it’s because the term valuation refers to the method of determining a stock’s intrinsic, or theoretical, value.
Basically, it’s how valuable the market thinks Rivian could become. Keep in mind this $80 billion figure is what Rivian wants to see, not necessarily what they will achieve. So, Rivian isn’t worth 80 billion dollars. Even Tesla was only valued at $1.7 billion when they IPO’ed.
The Tesla precedent
However, if there is anything we learned from Tesla, it is that novel electric car manufacturers have the capacity, and the market, to completely surpass expectations without hitting a single manufacturing goal. Let’s not forget that Amazon is backing the new, upstart American auto company who, alongside the R1T truck and R1S SUV, is developing and manufacturing a delivery vehicle that can be used by their generous benefactor.
Even if Amazon gets a hefty discount, Rivian is already guaranteed to sell 100,000 of them by 2030, and don’t even get me started on the exceptional R&D that is sure to come out of Rivian’s delivery van expedition. Pair this with investments from Ford and plans for a second assembly plant, it’s easy to understand the hype.
So, who cares?
What’s the point of all this? Simply put, that Rivian has the potential to be an extremely valuable company and a direct competitor to Tesla, but that doesn’t matter. Maybe they’re valued at $80 billion. Maybe it’s not even $50 billion.
What matters is that consumers get more captivating vehicles to choose from. Rivian is not the next Tesla. Nobody is. Tesla is Tesla and Rivian is Rivian. They are two separate companies who happen to be competing in similar markets, but comparing what is to come with what already is keeps us from having the vision necessary to truly appreciate what is happening.