Rivian Raises Target IPO Price (RIVN)

[André]

I subscribe to the “buy/hold” and “time in market” or “don’t time the market” philosophy.

That means that “buy the dip” is actually wrong. Just buy when you have the money to invest. Then hold for the long-term. Trying to micro-optimize and “buy dips” is timing the market and even “experts” that dedicate their careers to it seem to be unable to ”beat the index” most of the time. Amateurs have no hope of consistently doing it. When it happens, it’s dumb luck.

If you believe in Rivian and have a long-term outlook, then buy when you’re ready and hold the position. I wouldn’t be concerned with short-term movement in the price. And trying to buy a “dip” just another form of gambling.

That's right although in this case the offering look like oversubscribed so the retail can piggy back on the institutions discipline to keep pricing in a decent range (if it still exist these days...) but are sometime frustrated not having a full allocation on the IPO listing (institutions are probably already asking for more than the max offering so the underwriters will reserve the minimum allocation for retail possible), and buy like crazy to cover what's missing driving price up while hedge funds dump to them as much as they can without hurting the stock too much and make a quick gain. If RVIN delivers on their targets the stock should be fine but if they miss each quarters things are going to get worst before getting better...

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[loucetios]

That’s a small part of it for me, it bothers me, but I also met RJ in person and he didn’t give me that impression that he would tolerate that kind of behavior. I’m sure the person that terminated her employment will be soon be following her out the door. The larger part of me for me is the delays happening for customers that we’re supposed to be receiving their trucks now, and this month.

Why would they build 1000 vehicles by the end of this year only to deliver them to employees? I understand the quality control, and ramp up, but the third-party customers being told that they’re not going to receive theirs until March or April in some cases really makes me wonder if they’re manufacturing is much further behind than what they’re disclosing. Also the fact that they still have on their website all launch edition holders will be contacted by Thanksgiving, which is highly unlikely.

Things just aren’t adding up for me

I am wondering if the contact by Thanksgiving will be an email.

 

[guernsej]

Actually, the underwriters are updating in real time a detailed book of the indications of interest from all institutions which will buy the bulk of the shares with the number of shares they want for various price levels. That’s how they know if the offering is oversubscribed or not and how they can fix the price range very closely to the final price on the pricing day. It‘s not unusual to have a book of orders for 2-3x the maximum offering size for a good Company. That’s also how they can pull out an IPO before pricing if the book is so weak that pricing will go below the shareholders threshold. Retail allocation is not driving pricing on such a large offering.

Yes. The underwriters' clients are institutions. Not sure what you're correcting.

 

[André]

Yes. The underwriters' clients are institutions. Not sure what you're correcting.

« stocks that aren't traded on a public exchange yet can't be oversold because they're not being traded. »

yes they can…

 

[Dbeglor]

I'll preface this by saying I'm not necessarily weighing in on whether Rivian's valuation is "right" or not. However, for the popular argument of "It's crazy for Rivian to be worth as much as XX", it's a catchy headline, but it ignores a HUGE elephant in the room which is the balance sheets of the legacy OEMs and what I think people are actually thinking when they say XX is worth YY - total enterprise value.

So, for starters, the Rivian IPO is NOT valuing the company anywhere near that of Ford or GM, despite a similar Market Cap. It is valuing the equity that way, but both of those companies are majority owned by lenders, not the shareholders. Combined they have over $255 billion in long term debt (Rivian has $2m) and nearly $400 billion in total liabilities (Rivian $972m). Ford & GM have a combined pension liability alone of $35 billion.

For a similar argument, Tesla is also not saddled with the excessive debt that other OEM's have built up over time. Now, it's Enterprise Value is still 5x of Ford/GM, but not the 15x their market caps are.

Food for thought.....

 

[André]

I'll preface this by saying I'm not necessarily weighing in on whether Rivian's valuation is "right" or not. However, for the popular argument of "It's crazy for Rivian to be worth as much as XX", it's a catchy headline, but it ignores a HUGE elephant in the room which is the balance sheets of the legacy OEMs and what I think people are actually thinking when they say XX is worth YY - total enterprise value.

So, for starters, the Rivian IPO is NOT valuing the company anywhere near that of Ford or GM, despite a similar Market Cap. It is valuing the equity that way, but both of those companies are majority owned by lenders, not the shareholders. Combined they have over $255 billion in long term debt (Rivian has $2m) and nearly $400 billion in total liabilities (Rivian $972m). Ford & GM have a combined pension liability alone of $35 billion.

For a similar argument, Tesla is also not saddled with the excessive debt that other OEM's have built up over time. Now, it's Enterprise Value is still 5x of Ford/GM, but not the 15x their market caps are.

Food for thought.....

More interesting would the TEV shown on our table for each divided by their 2022/2023 EBITDA to compare valuation multiples. Absolute TEV is a much better apples to apples comparison you are right in terms of overall size… but RVIN is projecting 150,000 EVs by 2024 while Tesla will probably be at 2M EVs minimum by then: 500M TEV/car for RIVN versus 600M TEV/car for Tesla which shows Tesla more expensive assuming similar gross margins and overhead %. Obviously Tesla makes money now…

 

[blturner]

So a few days ago I was asked how much RIVN I planned to buy. I said all I could, and now the price has jumped 25%. Feel like I fell for a used car dealer trick. That question should not have been asked.
I hate it when honesty is not the best policy.

 

[guernsej]

« stocks that aren't traded on a public exchange yet can't be oversold because they're not being traded. »

yes they can…

New stock issues are oversubscribed or undersubscribed. Once shares are being actively traded, they can be described as overbought or oversold.

 

[AxelR]

So a few days ago I was asked how much RIVN I planned to buy. I said all I could, and now the price has jumped 25%. Feel like I fell for a used car dealer trick. That question should not have been asked.
I hate it when honesty is not the best policy.

Didn’t look at it this way but you’re not wrong.
I’ve been wondering for a few days what truly could make them the next big thing and I feel that since they’re coming late to market and are going to be competing with the likes of Ford and GM, I don’t know anymore. Are they the first electric van company?
Msybe their shares are priced a little high for what they’re bringing to the table. They’re not disrupting anything at this point.

 

[André]

New stock issues are oversubscribed or undersubscribed. Once shares are being actively traded, they can be described as overbought or oversold.

I don’t see the difference for the purpose of assessing demand which was the point but I guess you have the right wording for it…

 

[simpsonhomer]

Didn’t look at it this way but you’re not wrong.
I’ve been wondering for a few days what truly could make them the next big thing and I feel that since they’re coming late to market and are going to be competing with the likes of Ford and GM, I don’t know anymore. Are they the first electric van company?
Msybe their shares are priced a little high for what they’re bringing to the table. They’re not disrupting anything at this point.

The biggest problem facing Ford, GM, and legacy carmakers is that they can't sell EVs alongside their ICE cars. Dealers won't push EVs because they don't bring in the big service money. This has been a long-standing problem for legacy carmakers. And they can't say an EV is better than gas cars when 99% of their sales are gas cars.

The only EV companies that will succeed are ones that start with a clean slate. Replacing gas drivetrains with batteries and motors just doesn't cut it. For over a decade, people have been saying that Ford and GM will take over the EV market but all they've done is put out half-baked cars that their own dealers hide in the back corner.

 

[SantaFeSpence]

I can't escape the premonition that RIVN will be trading in the $30-40 dollar range before 2021 ends. My head tells me the smart play is buy the inevitable dip whenever it happens. My heart wants to go all-in about $10k because "Rivian is awesome and is going to be a world-beater, earth-saver." Right??

I hear ya, and am in the same boat. At the earlier projected price of around $60/share I was a definite "yes", but now at around $70/share I'm less sure. Then again, since they are allowing me only 175 shares tomorrow, that extra $1750 doesn't seem like that much. Then when the market reacts on Wednesday, we'll probably be able to buy when the price dips (as I expect it will as cooler heads prevail) and thus average out at a lower price. If the unexpected happens and the share price rises, why then we'll look smart for having bought before the opening bell. Ya think?

 

[Forager]

Just got an email from Morgan Stanley stating new price range is $72-74, up from the original $57-62

Even without buying the full allotment of 175 shares I was thinking of picking up something, but a 26% price increase is making me rethink that.

 

[jjswan33]

Something to keep in mind in all this debate.. They haven’t set the final price yet, if the demand is still really high at 72-74 they may price higher when they finally set the price.

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