Help me stay bullish

[RivianSurvive]

This is not financial advice, but it appears that it is mathematically unlikely that Rivian could generate a profit without the Georgia plant.

Bottom line is delaying the Georgia plant appears to be a bad strategic move for the future of Rivian as a standalone company. Delaying the Georgia plant is likely just a move to plan an exit in the form of a takeover.

Even if Rivian could pull 20% gross margins on R2 (there is no way they will pull gross margins of 20% on R2) at a $60,000 price point (it is unlikely the average price of the R2 at volume will be $60k) and they sold 100,000 units per year (it is unlikely they will be able to ramp to 100,000 units in the foreseeable future at Normal), they still will not be cash flow positive as an enterprise.

$60,000 x 20% = $12,000 gross profit per R2
$12,000 x 100,000 = $1,200,000,000 ($1.2 Billion)

Can anyone refute this simple math?

Assuming Rivian's costs stay stagnate as they ramp production of the R2 (not possible), even with these numbers they would probably not even be able to cover one single quarter of losses with a year of R2 gross profit, at full production volume! Because they will burn all remaining cash from now until the end of 2025, and when they introduce R2 it will not meaningfully decelerate operating losses, the future is clear.

If Rivian wants to continue its existence as a standalone company, it should take advantage of today's frothiest market of all time to raise another $5+ billion now, TODAY, and use that capital to quickly ramp the Georgia plant so it can manufacture R2s and R3s at a volume sufficient to support Rivian as a going concern. By not doing so they are throwing in the towel now and planning a strategic exit. It appears that anyone with 45 seconds and a spreadsheet (leaving hopes and dreams outside) would reach the same inevitable conclusion. There does not appear to be a reasonable non-emotional counterargument.

The only light at the end of the tunnel by delaying Georgia is it makes Rivian a more attractive pre-bankruptcy takeover target (Mercedes-Benz?).

PS: I own a R1S Quad and hope there is a company there in 4.6 years to honor the 5 year warranty.

I find your point interesting. The outlook of Rivian isn’t good. For the best interest of its customers, it should try to raise as much money as possible.

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[SASSquatch]

The only hope for Rivian stock at this point is for Rivian to undergo an acquisition - either by a legacy auto manufacturer (paging GM) that needs a pipeline of EVs or a company like Apple, that has cash to burn and abandoned their EV after spending 10B over the last decade.

Unless that happens, you are looking at a trajectory much like Tesla where, if - and that is a big if - Rivian survives, the stock will take off. A lot needs to happen between then and now and Rivian is facing a much different market then Tesla was at the beginning.

In the short term, Rivian may also need to release additional shares to raise capital, further pushing down the price.

I have tens of thousands invested in Rivan but I am looking at this is as a LONG play. 5-10 years long.

 

[Tahoe Man]

Totally agree. I just believe so much in the product and feel that others see it as well. I can't picture a situation they don't get scooped up or raise cash. I'm in it for the long haul. From an investment standpoint it's a total stupid gamble, which is why it's my only stock I own and only 150 shares. I'm all about super safe boring index funds, this was an emotional impulse by.

Nothing wrong with super safe index funds, it's a good was to get rich slowly.

My thinking is the stock has a floor under it due to an acquisition probability. Maybe Rivian can pull off a hail mary but an acquisition isn't bad for some.

On a broader term, the froth is coming out of the EV stocks, even Ford is back to preEV levels. One thing I learned long ago was never to take investment advice from fan forums, they're just way to bias, while critical thoughts and product complaints are usually chased away.

 

[Abilor]

If someone came to you with a business plan with post-R2 production at Normal, that showed you just burned $15 billion in debt and equity, you're still not profitable, and to be profitable you need to raise $5-$7 billion more and wait 3 years to build a new plant in Georgia, and while you're waiting those 3 years you are going to lose billions more, would you contribute capital to that company? Would you really?

I am friendly with a former CEO of a former B2B .com that went bankrupt in the .com crash. He tells a story just like Rivian's. They were burning cash furiously but growing revenue at a blockbuster rate. Weeks before the .com bust began (the world did not know the .com would begin), the company had lined up to raise billions in a secondary that would have likely given them the runway to survive and thrive during the .com bust. The deal was 100% ready to go, just push go and billions more in cash was on the balance sheet, but the equity would be diluted by 35%. At the 11th hour, the board voted down the equity raise. 18 months later the company was liquidated in bankruptcy. To save 35% of their equity, they lost 100% of their equity. This former CEO says that every day he thinks about this and how greedy they were to not do the deal they had fully baked. His biggest regret of his life.

Rivian's new plan to build R2 at Normal does not appear to be a medium or long term strategy. It appears to be an exit strategy. If they have an exit strategy (an acquisition) already negotiated, then great!

Truthfully, Rivian did all of this backward. After they raised $12 billion in the IPO, they should have had the discipline to slash OPEX and should have tabled series production of the R1xs (and focused on the delivery truck commitments). If they knew they were going to lose $40k-$60k per car (they knew it), you push STOP immediately. Once the $12 billion was raised, they did not have to show the world they could produce a car at scale. With discipline, with the cash on hand they could have built Georgia.

You should call RJ and explain all this. He might hire you over lunch. You can bring your CEO friend.

 

[KidThunder]

Thoughts?

As far as a company goes, they make an awesome product, they’ll be around for a while.

As a stock, if you’re underwater already, I don’t think it’s coming back. Without the Georgia plant I don’t see how they can churn out the volume enough to improve the balance sheet. Especially if the new vehicles on the line are half the price.

 

[LetsgoRIVN]

This is not financial advice, but it appears that it is mathematically unlikely that Rivian could generate a profit without the Georgia plant.

Bottom line is delaying the Georgia plant appears to be a bad strategic move for the future of Rivian as a standalone company. Delaying the Georgia plant is likely just a move to plan an exit in the form of a takeover.

Even if Rivian could pull 20% gross margins on R2 (there is no way they will pull gross margins of 20% on R2) at a $60,000 price point (it is unlikely the average price of the R2 at volume will be $60k) and they sold 100,000 units per year (it is unlikely they will be able to ramp to 100,000 units in the foreseeable future at Normal), they still will not be cash flow positive as an enterprise.

$60,000 x 20% = $12,000 gross profit per R2
$12,000 x 100,000 = $1,200,000,000 ($1.2 Billion)

Can anyone refute this simple math?

Assuming Rivian's costs stay stagnate as they ramp production of the R2 (not possible), even with these numbers they would probably not even be able to cover one single quarter of losses with a year of R2 gross profit, at full production volume! Because they will burn all remaining cash from now until the end of 2025, and when they introduce R2 it will not meaningfully decelerate operating losses, the future is clear.

If Rivian wants to continue its existence as a standalone company, it should take advantage of today's frothiest market of all time to raise another $5+ billion now, TODAY, and use that capital to quickly ramp the Georgia plant so it can manufacture R2s and R3s at a volume sufficient to support Rivian as a going concern. By not doing so they are throwing in the towel now and planning a strategic exit. It appears that anyone with 45 seconds and a spreadsheet (leaving hopes and dreams outside) would reach the same inevitable conclusion. There does not appear to be a reasonable non-emotional counterargument.

The only light at the end of the tunnel by delaying Georgia is it makes Rivian a more attractive pre-bankruptcy takeover target (Mercedes-Benz?).

PS: I own a R1S Quad and hope there is a company there in 4.6 years to honor the 5 year warranty.

No need to raise money now and it’s a smart decision!
Rates will go down this year and coming years, and when that happens investors will be on risk mode and will invest/lend money at cheaper rates even for unprofitable compagnies (but with potential).

 

[sphereobject]

No need to raise money now and it’s a smart decision!
Rates will go down this year and coming years, and when that happens investors will be on risk mode and will invest/lend money at cheaper rates even for unprofitable compagnies (but with potential).

This strategy is called hopes and dreams.

 

[sphereobject]

Unless that happens, you are looking at a trajectory much like Tesla where, if - and that is a big if - Rivian survives, the stock will take off. A lot needs to happen between then and now and Rivian is facing a much different market then Tesla was at the beginning.

Just to be clear for everyone, Rivian is not and will likely never be Tesla. Because Tesla was always teetering on insolvency it had to vertically integrate because OEM suppliers would not do business with it. Also, Elon had early experience with the roadster (at super low volume, therefore not billions in losses at that point) where he learned it would be impossible to be profitable with OEM suppliers.

Rivian is dependent upon OEM suppliers.

 

[SASSquatch]

Just to be clear for everyone, Rivian is not and will likely never be Tesla. Because Tesla was always teetering on insolvency it had to vertically integrate because OEM suppliers would not do business with it. Also, Elon had early experience with the roadster (at super low volume, therefore not billions in losses at that point) where he learned it would be impossible to be profitable with OEM suppliers.

Rivian is dependent upon OEM suppliers.

Rivan is dependent on volume production and sales of R2 like Tesla was for M3 at a similar point in time in their history. That was and is my only point.

Also, Rivian is moving as much in house as they can (see enduro motors) to reduce costs which is the Tesla model.

 

[LetsgoRIVN]

This strategy is called hopes and dreams.

Nope it’s called good business sense! Rivian does not need cash for the next 2yrs minimum and it’s stupid of them to raise money at high rates now, they have the option to wait and they should exercise this option.

 

[SASSquatch]

Nope it’s called good business sense! Rivian does not need cash for the next 2yrs minimum and it’s stupid of them to raise money at high rates now, they have the option to wait and they should exercise this option.

They can also raise money by issuing shares. This will dilute the value of existing shares, obviously, but that is always an option.

 

[Carscott]

I didn’t read any post. I have 45K in rivian stock. I am holding to see May 21 Q1 results. Here is my take. Remember the drone videos in December of normal plant full of EDVs. Those didn’t make it into the Q4 deliveries. Hence I think those could help the quarter. What I am worried about though is R1 sales are likely slowing due to R2 and R1 refresh talk. I know first hand that I’m affected. So revenues may be good but deliveries could be down. I don’t think the effects of the line shut down will be seen until Q2 results. Anyways we could see single digit stock price. If so I’ll try and buy more. Mind you in hind sight I should have just bought birkshire Hathaway stock and I could have enough money to buy 2 R1s instead of taking this risky approach.

 

[fyton2v]

The momentum is down and it would be a shock if the May news on deliveries is positive. Much of the hunker down info is already factored into analyst projections though. I’d guess we see single digits for a bit, too. Perhaps even leading up to the May earnings report.

I’m also hunkering down. I intended to be very long from the get go, but I wasn’t expecting the trough to be this low.

 

[Activist_Investor]

We are in the month of March. To deliver the first R2 to a customer in 2025 is to build one vehicle in 21 months or less. I am absolutely positive that I could deliver one R2 to one customer in 21 months time.

The story the public and investors want to hear is about first delivery and then subsequent increases in rate of production. That story is a late 2025 story and an exciting one. Any story about 2026 is a disappointing story.

I’m so confused by how badly RJ and the executive team have presented the delivery timeline story for R2. The story should be: “first delivery by late 2025“.

No understanding of 2026 exists in the human mind, but “next year” is something we understand and something fundamentally tied at a neurological level to feelings of optimism and excitement.

He needs his fellow executives to provide prudent advice early and often.

 

[Whale Blubber]

I am at $75. It's a very freeing feeling.

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