The Glass is Actually Half Full

[Willyspu]

As a comparison it took Tesla 10 years 2010 to 2020 to raise its stock price, and it went down so low Elon was going to take it private again. Start ups are a gamble but considering the infrastructure Rivian is investing in I would say they will slowly pull out of this and be a successful company.

Sponsored

 

[Arbitrator]

I believe that Rivian will survive, although there will be many bumps along the way. Just look at Tesla and Amazon, they not only survived but thrived, however there were times when they were in trouble funding their business plans. If you have a superior product, which Rivian does, then as long as they have good management, which they do, then they will make it. I put my money on them by not only recently purchasing a RIS but I also bought options last week which expire in October 2024 with a strike price of $12.50.

 

[140 degrees]

Thanks all for your comments. I originally intended this thread to be about the health of the company, and not so much about the stock. I'm not a finance professional, and don't feel comfortable recommending individual stocks to friends. I don't mind if others do it, it's just not my thing.

When I bought my R1T last year, I was quite stressed about whether Rivian would be around to support my vehicle in the long term. After some soul searching, my wife and I decided to go ahead with the purchase. Since then I have found the truck to be better than I expected, and that some of the threats facing the company have (IMHO) diminished. The original post was aimed at potential buyers and current owners who are feeling stressed, like I was, about buying from a new company.

I'd like to address some points made in other posts.

VSG reminded us not to forget about the RCV. Sorry, my first post was just getting too long. It could be more important than the other R1 products. More about that below.

DuoRivians made a number of good points. He is right in telling us that this is a very risky stock. He is right about the importance of raising additional capital. We totally agree that raising money by selling stock at these levels would be bad for existing shareholders.

Some other general thoughts.

1. Auto manufacturing is capital intensive. Most of the big manufacturers borrow alot of money. According to Investopedia, in the first quarter of 2022, Ford's Debt/Equity was 3.010, GM was 1.768, and Stellantis was 0.556. If Rivian borrowed enough to reach 0.9, it would be typical for the industry. Not a danger sign, IMHO.

2. The real risk is the Interest Coverage Ratio. In otherwords, are the interest payments covered by earnings? Suppose I went into a bank asking for a big loan and the banker asked me how I would repay the loan and interest. What if I replied, "I don't have earnings, I'll be back for more loans?"? Rivian is properly focused on getting to profitability. Absolutely. Critical.

3. Some people have expressed concern about the dilution of stockholders equity if Rivian sells more bonds. This is only the case if they sell more convertible bonds. With a convertible, if the stock goes above the conversion price, the holder may take stock at the agreed price instead of accepting repayment of the bond. That means dilution for existing stockholders. Given where the stock is now, it was a good deal for Rivian. They got below market interest rates until 2030, when the bonds expire. If Rivian starts generating profits, the agreement gives them the option to buy back the convertibles. Then they can sell generic corporate bonds.

4. DuoRivians suggested that Rivian will soon have to go to the market to sell debt or equity. There is a third option as a partial solution. They could form corporate partnerships. Something like the Amazon deal, only smaller, hopefully with a cash advance or services provided instead of selling equity. They can offer vehicle or software customization, maintenance agreements with enhanced term and response time, RCV delivery prioritization, or even future discounts. As an example, AT&T has committed to buying Rivian vans, while Rivian has agreed that AT&T will be their connectivity provider.

If you made it this far, thanks for reading.

 

[MidnightRivian]

Good luck to all!

Sponsored