EV startup Rivian surges on second day of trading, market cap crosses Ford, GM

• Rivian, which is yet to establish a business model and produce vehicles in high volumes, surpassed both Ford and General Motors by market cap

• The EV maker expects to generate revenue of up to $1 million and foresees to lose up to $1.28 billion for the third quarter

Shares of electric vehicle startup Rivian Automotive Inc continued its upward climb on Thursday and closed after surging more than 22%, one day after its public market debut.

The Amazon.com Inc and Ford Motor Co backed carmaker already surpassed both Ford and General Motors Co by market cap, reaching a valuation of nearly $120.50 billion.

GM’s market cap was around $89.80 billion, while Ford’s was $78.15 billion.

The valuation means Amazon’s 20% stake in Rivian is now worth more than $24 billion and puts Ford’s 12% stake at nearly $14.50 billion.

Also Read: Tesla crosses $1 trillion market cap as Hertz orders 100,000 EVs for its rental fleet

The market response is especially staggering as the electric pickup truck maker does not have an established business model and has yet to produce high volumes of its vehicles.

While, Rivian expects to generate revenue of up to $1 million for the third quarter, and it foresees to lose up to $1.28 billion during the same quarter.

Exclusive deal with Amazon

In 2019, Amazon, which is converting its delivery vehicle fleet to electric, ordered 100,000 RCV commercial delivery vans, which is scheduled to be handed over by 2030.

However, in a filing with the SEC, Rivian said the two companies agreed that Amazon would have exclusive rights to the delivery van for four years after Rivian delivered EVs in the first batch.

Amazon would also have the right of first refusal for two years; after that, Rivian can sell electric delivery vehicles to other companies.

There are also a few provisions in the agreement with Amazon that can void the exclusivity period for Rivian.

If Amazon doesn’t order 10,000 of Rivian’s vans in each of the two years after they go into production, or if Amazon terminates its agreement with Rivian before ordering all 100,000 vans, the e-commerce giant would have to reimburse the startup, and the exclusivity period would be voided.

On the other hand, Ford had tagged its relationship with Rivian as a strategic investment. The automobile giant earlier planned that its Lincoln division would build electric vehicles with the upstart; however, those plans were abandoned during the pandemic.

The prospectus

On Wednesday, in one of the biggest IPOs this year, Rivian shares ended going up 29%, giving the company a market cap of $86 billion.

Shares of Rivian was priced initially at $78 apiece and surged 50% when it opened, at $106.75 per share.

Besides its fleet business, the company has launched its fully electric pickup, the R1T and plans to launch a seven-passenger battery-electric SUV, the R1S, in December. 

Rivian, which trades under the symbol “RIVN” on the Nasdaq, has the capacity to produce up to 150,000 vehicles per year.

Also Read: EV startup Rivian starts first-ever electric truck production

In SEC filings, the company said it would produce about 65,000 pickup trucks and SUVs and 85,000 RCV commercial delivery vans and in an amendment to its S-1 filing Rivian said it has a backlog of pre-orders for 55,400 R1T and R1S vehicles, which it plans to deliver by the end of 2023.

Picture Credit: Bloomberg