Business Insider IPO recommendation article - don't buy at target price says equity research firm

[kanundrum]

What ever the news says that may drive up or down stock price of an IPO always view everything as a gamble (I know it should be obvious).

Any money you put in a IPO, ask your self how would I feel if I lost 70% of $? AM I alright with it? I am cool with my $10,000 becoming $3,000? At least for a short amount of time with the potential to go back to more than $10,000 but not a guarantee?

I invested in LCID back in February and had several months of massive losses but now its on the up. Food for thought is all.

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[Matt D.]

Tesla is selling 100,000 Model 3 to Hertz at the same margins than its retail customers. I would bet Amazon EDV have a much lower margin for RIVIAN than the R1T and R1S. Any informations on this in the S1 ?

Why do you assume they have lower margins? Also, smaller margins can be made up for with higher volume. I believe Amazon will definitely request very high volumes of the EDV.

 

[jjswan33]

Neither of those appear to be to market (at least in the US) yet.

Definitely agree the Ducato isn't available in the US, I believe the EV promaster is a 2023 model arriving in late 2022. I would argue that the Ford ETransit is as close to market as the Rivian RDV.

https://www.dbusiness.com/daily-news/2022-ford-e-transit-vans-hit-the-road-early/

It seems that the eTransit is in the hands of select customers for a beta which would be similar to Rivian's existing deliveries to Amazon.

 

[André]

Why do you assume they have lower margins? Also, smaller margins can be made up for with higher volume. I believe Amazon will definitely request very high volumes of the EDV.

Even if Tesla will have a 2M cars run rate capacity by the end of 2022, they can't keep up with demand and this is why Hertz will pay the same price than any other customer. RIVIAN is hoping to have a run rate capacity of 150,000 by early 2024 which is 2.5x its preorders. Amazon has an exclusivity for 4 years and has no obligation to buy any EDV although RIVIAN can terminate this contract if Amazon doesn't buy 10,000 EDV in 2 consecutive years after first delivery.

 

[seventyfour]

I don’t think of the company that is first to market with an EDV as a “niche player”. Especially with their relationship to Amazon. Those vans are ubiquitous. If Rivian can just replace all of Amazon’s ICE fleet, they are going to do very well for themselves.

edit: never mind - I was wrong, see post below!

The Forbes article made Amazon’s commitment to Rivian seem much less beneficial than I’ve believed this whole time.
The Forbes article made Amazon’s commitment to Rivian seem much less beneficial than I’ve believed this whole time.

Amazon commits to buy as low as zero vans, retains the right to partner with other companies to supply their vans, while Rivian cannot sell their vans to anyone else for 4 years, with Amazon having the right to first refusal for another 2? Or something along those lines.

Sounds like Amazon gets to hold Rivian’s commercial division hostage for 6 years if they decide to go a different direction? I guess why would Amazon do that if they’re a major investor, but it doesn’t seem to leave a lot of back up plans.

 

[André]

The Forbes article made Amazon’s commitment to Rivian seem much less beneficial than I’ve believed this whole time.

Amazon commits to buy as low as zero vans, retains the right to partner with other companies to supply their vans, while Rivian cannot sell their vans to anyone else for 4 years, with Amazon having the right to first refusal for another 2? Or something along those lines.

Sounds like Amazon gets to hold Rivian’s commercial division hostage for 6 years if they decide to go a different direction? I guess why would Amazon do that if they’re a major investor, but it doesn’t seem to leave a lot of back up plans.

"The EDV Agreement does not contain a minimum order quantity or minimum purchase requirements. Additionally, forecasts, order plans, and purchase orders are subject to modification or cancellation upon notice, as set forth in the EDV Agreement. However, in the event that Logistics terminates the EDV Agreement prior to the purchase of a minimum threshold of an aggregate of 100,000 EDVs or skateboards (except, for the avoidance of doubt, a termination for cause due to our material breach), or if we terminate the EDV Agreement due to Logistics’ failure to order an aggregate of at least 10,000 EDVs or skateboards in each of any two consecutive calendar years following the start of production, Logistics is required to reimburse us for our investment costs in accordance with a reimbursement formula set forth in the EDV Agreement, in addition to other applicable wind-down costs. In addition, we would no longer be bound by the exclusivity provisions set forth in the EDV Agreement with respect to the development, manufacture, and sale of skateboards to third-parties."

 

[seventyfour]

"The EDV Agreement does not contain a minimum order quantity or minimum purchase requirements. Additionally, forecasts, order plans, and purchase orders are subject to modification or cancellation upon notice, as set forth in the EDV Agreement. However, in the event that Logistics terminates the EDV Agreement prior to the purchase of a minimum threshold of an aggregate of 100,000 EDVs or skateboards (except, for the avoidance of doubt, a termination for cause due to our material breach), or if we terminate the EDV Agreement due to Logistics’ failure to order an aggregate of at least 10,000 EDVs or skateboards in each of any two consecutive calendar years following the start of production, Logistics is required to reimburse us for our investment costs in accordance with a reimbursement formula set forth in the EDV Agreement, in addition to other applicable wind-down costs. In addition, we would no longer be bound by the exclusivity provisions set forth in the EDV Agreement with respect to the development, manufacture, and sale of skateboards to third-parties."

Good find thanks. I stand corrected!

 

[Dbeglor]

For me, a stock like Rivian or Tesla is not simply an automaker stock, I see them more as tech stocks than anything else. In the long run, both can be so much more than just making cars that people like and buy. The lofty valuations are really based on what they can potentially bring to a much wider market hopefully in the not too far distant future, such as a breakthrough in battery technology, true self driving for the masses, etc. Otherwise if their respective stock value is based solely on the cars they make, then for sure they are truly way overpriced because they would just be another Ford or Honda.

Agreed at a high level. Obviously, a tech stock can still be overvalued, and often is because it's hard to nail down. But others have made the comparison and I think it's an apt one, that vehicles are making the same transition that phones did 10-15 years ago with the advent of the iphone. They are moving from a mostly single product sale to a vessel for ongoing revenue streams. Makers are becoming vertically integrated to capture all of the revenue streams (current makers only capture the sale). That and the cost structure of direct to consumer and just general manufacturing gives EVs significantly higher gross margins (I believe Tesla is something like 20% vs. 5% for legacy automakers?), so they can make the same amount of money on lower volume, or much more money on the same volume.

A key question is whether those margins continue, or as everyone shifts to the same model, does the invisible hand of competition settle them back down into the 5% area. The latter is most likely, unless a company can create a true lasting competitive advantage that warrants higher product prices for the same cost. Tesla has that now with little competition, but we'll see in the future. Autonomous/highly advanced assisted driving could be one source to that.

Then the next question is how long of a runway do the upstarts have before they are caught by the old hands. Those guys have to turn the massive ship, change mentality, shed their dealership structures (with significant cost), reinvest in new manufacturing (massive cost), etc. But someday everyone will be back on the same relative playing field and margins will come back down through competition. There will come a day when everybody has roughly the same range, roughly the same assisted driving capabilities, etc. and it will revert back to marketing and branding and finding your niche, eeking our marginal gains in scale/manufacturing, etc.

 

[LoneStar]

.... then we do this all over again with FLYING HOVERCRAFT cars! ?‍??

 

[Mister Person]

My hot armchair take is that valuations are a reflection of what the market thinks that company can do in the future. Rivian has proven they can raise capital and design and deliver products. I see many tailwinds at their back - gov'ts phasing out ICE cars, the proven market demand of luxury and economy EVs, large votes of confidence from Ford and Amazon. They already have one huge customer for commercial EVS and FleetOS, and 50+k consumer reservations.

 

[lg3103]

This reminds me of Lucid going public through the SPAC. The SPAC starter with a much lower share value but once the acquisition went through the share price soared to $64+ for people to realize they had no cars in customers hands.bought shares when they dropped to 20, more at 19, and an additional batch at 22. Now they are creating lots of hype, communicate well and get the cars into customers hands and the share price is probably shooting up a little too high because of all the access cash in the markets. I’ll by 1 share under the DSP as a sentimental souvenir and then I’ll by in when the dip happens.

 

[RayzorBEV]

I am still expecting that the IPO price will still be raised, unless the bad press suppresses that.

Like the lawsuit just filed against Rivian by a former female employee...

 

[jjswan33]

Like the lawsuit just filed against Rivian by a former female employee...

IPO range just updated. I guess I called that one.

 

[TessP100D]

What ever the news says that may drive up or down stock price of an IPO always view everything as a gamble (I know it should be obvious).

Any money you put in a IPO, ask your self how would I feel if I lost 70% of $? AM I alright with it? I am cool with my $10,000 becoming $3,000? At least for a short amount of time with the potential to go back to more than $10,000 but not a guarantee?

I invested in LCID back in February and had several months of massive losses but now its on the up. Food for thought is all.

Good points.

 

[TessP100D]

Why do you assume they have lower margins? Also, smaller margins can be made up for with higher volume. I believe Amazon will definitely request very high volumes of the EDV.

Respectfully I don't think we will see large volumes of sales of the RT1. It’s. As all niche market truck and it’s really expensive.

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