Happy Monday everyone! 👋
Welcome to the first ever RoboStox newsletter report! If you enjoy this, feel free to forward or share with your friends.
💵 How They Make Money
On the face of it, Rivian’s core business is pretty simple. They manufacture and sell electric vehicles. Their first 3 vehicle models include: the R1T pickup, the R1S SUV and the electric delivery van (EDV) designed for Amazon.
But the company also plans to add a number of recurring revenue streams including: level 2 autonomous driving software, insurance and telematics, fleet management, and cloud services based on Amazon’s AWS.
So far Rivian’s products have received rave reviews. Motor Trend magazine called Rivian’s R1T model the “most remarkable pickup we’ve ever seen”.
Marques Brownlee (MKBHD), an influential tech reviewer described Rivian as “the most impressive electric truck I have ever seen”. Brownlee has 15.2m subscribers on YouTube and 5.2m Twitter followers.
In the company’s latest letter to shareholders, they reported an increase in the number of pre-orders from 55k to 71k. This shows healthy demand and strong desirability for the product among consumers.
📊 Key Financials
At the time of writing, Rivian was valued at a market cap of $76bn. (Ford is currently worth $98bn).
Generated total revenue of $1m on losses of $82m in Q3 2021.
Raised total of $20bn to date:
$13.7bn in their recent IPO.
$1.2bn in convertible notes.
$5bn in the private markets.
Income Statement: operational losses of $776m in Q3, (up from $289m during the same period last year)
Cash Flow Statement (including capital expenditure on factories etc): negative cash flow of $1.15bn in Q3 (up from $435m last year).
👨 👩 Leadership
Rivian’s CEO is 38-year old R.J. Scaringe. By all accounts he is a car fanatic and dreamed of starting a car company since high school. He completed both his masters and PhD in mechanical engineering from MIT. After graduating he went straight to starting Rivian. He has spent 12 years at the company to date.
Prior to the IPO Scaringe successfully raised $5bn in the private markets from many blue chip investors including the pension funds of American Airlines, Costco, L’Oreal, Toyota, and many others.
But, unlike Elon Musk before Tesla, Scaringe does not have a track record of successful exits or starting other companies.
📈 Bull Case
Electric car companies are not judged by the market purely on current revenue and profit. The stock price will be determined primarily on whether it can hit its delivery targets on time.
Rivian has built a strong aspirational brand aimed at the affluent outdoor demographic which could be very lucrative. The 71k pre-orders from consumers backs this up.
The 100k vehicle pre-order from Amazon is a huge vote of confidence in Rivian from a major tech company.
🐻 Bear Case
Vehicle manufacturing is notoriously complex and full of pitfalls. Apart from Tesla, no car startup has survived in the US in the last 100 years.
The company has plans to build and launch 3 different vehicle types at the same time. This has never been done before. Tesla struggled and almost failed on numerous occasions just to deliver one.
They have also announced plans to build a second factory in Georgia before all their manufacturing problems have been resolved at the current plant in Normal, Illinois. Capital expenditures are likely to skyrocket.
Rivian has raised huge amounts of cash ($20bn), but the company is spending so much that at the current rate it will have burned through most of it in just 3 years.
The big blue chip names who put money into Rivian during the private rounds will want to see a return on their investment. Once the lock-up period expires, the stock price may take a hit.
There was huge appetite for the $RIVN IPO among retail investors. In some cases the demand was so great that SoFi, a trading app, could only offer investors just one share. This over-exuberance means that people may have missed key disclosures i.e. Amazon’s plan to buy electric vans from rival Stellantis.
What did I miss? - These reports are a learning process for me and I’m very much open to constructive feedback and suggestions. What company or crypto asset should I cover next? Feel free to leave your response in the comments on Substack.
Disclaimer: I am not a financial advisor, none of this report should be taken as financial advice. Instead this should be viewed as jumping-off point to conduct your own research. I don’t hold any position short or long in Rivian, but I’ve been long Tesla since 2015.