Sgt Beavis
Well-Known Member
WOW! Today was crazy. Almost to $180.
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True. That’s why we’re here. Why I'm excited to get our orders finalized. Why many jumped at the chance to invest in the IPO (I invested, though I'd say warily). I wouldn’t say at all that we’re underestimating Rivian. Just don’t know if their business model works, if they can grow fast enough and be profitable. So I think I’ll stick with unprecedentedWell it was written 10 years ago so back when $75B was a lot of money…
Full disclosure: I bought $13K of stock at the IPO price but I have an extremely diversified portfolio and frankly I won’t lose sleep if it doubles again or falls by half. It’s just kind of a fun side bet. I’m in no hurry to sell nor am I interested in buying more. Just having fun on the ride.
That said, people are underestimating Rivian (IMHO) when they quote the income statement. It ignores the fact that the company has been around for a decade, that they have thousands of employees, that they’ve managed to amass 55K “serious” orders ($1K deposits) for a $100K truck and they’ve managed to squirt a few off the assembly lines while garnering rave reviews from the press. That ain’t nothing
Neither does anyone else.But just don’t know if their business model works, if they can grow fast enough and be profitable.
Amazon went public in 1997 at something like a $400m valuation and by 2000 it's valuation had increased 50X. Let me repeat, Five-Zero-X. I'll also remind those who may not remember: it was an online bookstore. (Then the dotcom bust happened and the valuation dropped from $30B to just $3B... but I digress)So I think I’ll stick with unprecedented
I agree that it has limited impact on cash even though may look bad in accounting. But this sudden rise and put pressure on Rivian to balance compensation with new hires. Overall they might have to increase the compensation. Secondly, the company has to deal with dissatisfaction employees will have because of cliff drop.I don’t fully understand your concern. Rivian retains all unsold stock. The stock they provide employees as compensation is not bought from the open market, rather is awarded from their unsold “chest” of money. For the last year, new employees were being awarded restricted stock units on the basis of a $20-27b valuation with the promise that it would be worth 3x that at IPO. When the initial stock price was set, it was just a 2x multiple of what they had sold many new employees on. I think some of the initial upward pressure to get to $78 IPO price was just as much from bankers as it was internal pressure to deliver on this promise.
Anyway, now that RIVN is trading over $150, it represents a 5-6x multiple of what employees’ awards were based on. This vests over 4 years, so as long as the stock price is steady it means Rivian has “overfunded” their employees and Rivian will be far less likely to give any bonuses or raises —that’s how Amazon does it. The other factor at play here is that Rivian can award LESS shares to new employees to get to the same total INITIAL compensation as an old employee. So, whereas an old employee would get 1000 RSU valued at $27,000 the new guy gets 250 RSU valued at $27,000. The fact that the old guy’s stock is now worth $150k is immaterial, that’s how the game is played in the tech world. That’s also a big factor why so many former Tesla employees have found their way to Rivian, and why so many Rivian employees will find their way to the next big startup in 5-6 years.
EV sales are at 2% of the new vehicle market. Nobody's here to "destroy," they're tapping into a share of a growing market. The more established companies have been slow to adapt, but they will adapt.So, I don't see this as unprecedented. Rivian (and Tesla and maybe all the electric startups) are here to destroy/displace GM and Ford and Toyota.
Whatever we think of the valuation, Rivian now has the cash to build a couple factories and develop lower cost products. They are following the Tesla playbook in that sense. Expensive vehicles coming out of one factory...build factories and introduce lower cost vehicles...build out a charging network...win. Rivian seems well positioned (maybe a little "beyond their station" but still) to build a world class brand and product portfolio.
I figured the 175 IPO shares were a risky speculation, but I'm holding.
yes, I meant as a result of the IPO. But also they have more debt leverage now.The stock price doesn't affect the cash a company has unless they list more shares.
I can't envision a world in which all of the vehicle manufacturers that exist today still exist in 10-20 years in their current form. That could include the likes of Rivian and Lucid, by the way, but clearly the market consensus is that it means some of the legacy companies. The valuations of the big three EV makers (even at a substantial haircut for overenthusiasm) implies a zero-sum outcome in which millions of vehicles a year come off the board from existing players over the course of 10-15 years. Annual vehicle sales will start declining in 2030 when we most likely enter a plateau in overall population, or actual decline (depending on immigration), in addition to advancements in autonomous which would likely reduce the need for personal vehicles.Since Toyota, Datsun, and Honda entered the US market, have they destroyed GM, Ford, and Chrysler? What about Hyundai/Kia? Have they destroyed GM, Ford, Chrysler, Toyota, Nissan, or Honda? What about Mazda? Subaru? Did Audi destroy BMW and Mercedes when it entered the US luxury market?
Of course the answer to all of those is no. The US auto market is growing. There's room for a few more companies to carve out a piece of the market without having to go so far as taking any existing manufacturer out entirely.
I ordered my first book from Amazon in '95. Great customer service. Got a book I couldn't find elsewhere for a gift. I remember the crazy Amazon deals and coupons as they were growing the business. Remember getting a Palm 3Xe for 1/3 less than elsewhere ~ 2000 with one of their coupon codes. I think its still packed away somewhere......Amazon went public in 1997 at something like a $400m valuation and by 2000 it's valuation had increased 50X. Let me repeat, Five-Zero-X. I'll also remind those who may not remember: it was an online bookstore. (Then the dotcom bust happened and the valuation dropped from $30B to just $3B... but I digress)
The vision they were selling was that they were going to be the next walmart. Here we are two decades later and indeed they're arguably the next walmart, following many years of huge losses and/or extremely paltry profits.
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So, I don't see this as unprecedented.
This is exactly what Wayfair did when they started. Unprecedented deals and a high level of customer service. They literally told me to keep a sofa that had issues and sent me another free one, on top of refunding my money. Two sofas for free...insane...I think we were considering the IPO valuation vs demand. It was unprecedented that the IPO undervalued the (limited) amount of stock they were selling by ~ 2X and Rivian could have gotten another $10+ billion, even without sales, revenue, etc. (at least you can make the case, but not w 100% certainty)
I guess I see how you make the case Amazon is a precedent. To me, Amazon had a working business model and had demonstrated they could execute and satisfy customers, though w/o profits. Still, thats a few step's down the road from where Rivian is at, so I consider Rivian unprecedented.
I ordered my first book from Amazon in '95. Great customer service. Got a book I couldn't find elsewhere for a gift. I remember the crazy Amazon deals and coupons as they were growing the business. Remember getting a Palm 3Xe for 1/3 less than elsewhere ~ 2000 with one of their coupon codes. I think its still packed away somewhere......
Freight and logistics are expensive, compared to the cost of product. It was certainly cheaper for them to let you keep the sofa than to go through everything required to get back some heavy, faulty furniture in their warehouse.This is exactly what Wayfair did when they started. Unprecedented deals and a high level of customer service. They literally told me to keep a sofa that had issues and sent me another free one, on top of refunding my money. Two sofas for free...insane...
They also did this on much smaller items/issues as well. They had a goal to disrupt how we buy furniture and it turned out pretty well for them!Freight and logistics are expensive, compared to the cost of product. It was certainly cheaper for them to let you keep the sofa than to go through everything required to get back some heavy, faulty furniture in their warehouse.
This is the same reason all of the online mattress places just tell you to donate the mattress to a charity if you decide to not keep it the first year. WAY cheaper than having to deal with it themselves.
That said, the optics to the customer look great. It's a win/win.
You’re missing the point. Tech companies don’t balance the compensation of the new hires. An employee’s compensation is determined at the market rate for new employees across the market, not what that same job description within a company makes including equity. The tech world is full of people that have been at a company for 10+ years that have millions of dollars in equity doing the same job as a new hire that has $100,000 in equity. It’s not uncommon for a subordinate to have substantially more equity than their manager if the subordinate has a longer tenure than the manager in a high growth company.I agree that it has limited impact on cash even though may look bad in accounting. But this sudden rise and put pressure on Rivian to balance compensation with new hires. Overall they might have to increase the compensation. Secondly, the company has to deal with dissatisfaction employees will have because of cliff drop.
Whatever stock price is now doesn't look healthy. It has to have consequence even on Rivian. I am glad that I sold some stocks yesterday to reduce worry about price going wild