In November 2021, electric vehicle maker Rivian Automotive raised $12 billion by issuing 153 million shares priced at $78 each on the US markets. At the time, the company’s valuation exceeded $66 billion.
The IPO proved popular, and the stock price surged to $100 per share on the first day of trading, which brought Rivian’s valuation to $86 billion. To put that in context, Rivian’s market cap exceeded that of Ford Motor Co., one of the leading auto manufacturer in the world.
The excitement surrounding the IPO highlighted investor optimism about the future of the EV market.
However, the euphoria was short-lived.
In September 2021, Rivian’s quarterly report revealed the company had failed to produce and deliver a single vehicle. Even worse: Rivian posted a net loss of $1.2 billion. In fact, its only sources of revenue were loans and the issue of marketable securities.
In late September, Rivian delivered its first 11 vehicles and generated sales of less than $1 million. For a company with a bigger market cap than Ford, this was a very concerning announcement.
Despite this terrible news, the share price kept soaring and reached a peak of $172 on November 16th, 2021. Investors were banking on the fact the company would quickly turn its fortunes around, thanks to a lucrative contract the company secured to produce 100,000 electric vehicle delivery vans for Amazon through 2024.
However, the EV maker was a victim of overpromising and under delivering on its promises.
At the end of November 2021, investors starter selling the stock due to an apparent lack of progress in both vehicle production and delivery. The broader stock market sell-off dragged the share price down to lower and lower lows.
On March 10th, 2022, Rivian Automotive sunk to a new low after posting disappointing Q4 2021 financial results. The company revealed that it faced significant challenges in 2021, including a 10-day shutdown of its production lines, COVID-related supply chain disruptions, COVID-19 outbreaks in its factories and severe winter weather in Central Illinois.
At writing, the stock is down nearly 80% since its post-IPO peak of $179.
Can Rivian deliver on its promises and generate shareholder returns?
It must be noted that Rivian has the backing of both Ford and Amazon. This support can help the company weather the current turbulence and potentially deliver on its promises of becoming a leading EV manufacturer.
As of March 2022, Rivian has produced nearly 2,500 cars since it started production. The firm has a total planned annual capacity of 600,000 vehicles, and it expects to produce at least 25,000 vehicles in 2022.
Should investors buy Rivian stock?
Let’s be clear: Rivian is a high-risk, high reward play with no guarantees of success. Only those with an extremely high-risk tolerance should consider buying the stock at present. Prudent investors should wait for the company to meet its milestones before purchasing.
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