What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing today we're talking about the electric vehicle startup rivien, which has taken the world by storm with its recent ipo. They raised approximately 12 billion dollars on thursday november 11th at a valuation of about 65 billion dollars. This makes it the largest ipo of the us company, since facebook went public in 2012. in the first couple days after the shares started trading, the stock price rose to 128 dollars per share, giving them a valuation of about 110 billion dollars.

This makes them more valuable than ford general motors and honda. You've probably never seen a rivien car on the streets, because today, they've only delivered 156 of them, they've developed an electric pickup truck called the r1t and suv called the r1s. They also plan to make electric delivery vehicles for amazon with the meteoric rise of tesla over the past couple years. Investor hype around ev companies is at record levels.

Everyone is rushing to buy shares of any ev related stock hand over fists in the hopes that it'll become the next tesla, but it still seems strange how there's so much hype over an essentially pre-revenue company. That's going to burn billions of dollars per year for the foreseeable future in this video, we'll look at what rivien does why there is so much hype around the company and whether or not they will ever be able to justify their 110 billion valuation, while rivien is Still a pre-revenue company, it is surprisingly old. It was founded more than a decade ago, in 2009 by r.j skringe, an mit educated mechanical engineer. At first, they tried to design a hybrid electric sports car called the r1 which they planned to release in 2013, but they eventually shelved the idea and the r1 never made any commercial deliveries.

They operated as an obscure startup until 2015, when they received an investment from an undisclosed investor worth more than 100 million dollars. They used this money to buy an old mitsubishi factory in illinois. They also shifted their focus to fully electric and autonomous vehicles. In 2018.

They unveiled what were to be their first two production vehicles, the r1t, fully electric pickup truck and the r1s fully electric suv. They called these cars adventure vehicles and they are intended to be very hardy for off-road driving. They claim the pickup truck can tow up to 5 000 kilograms ascend at a 45 degree angle and drive in up to 1 meter of water. This could be very useful for off-road drivers who want to drive across small streams.

They also developed autonomous driving capabilities, including automatic steering on some highways adaptive cruise control and highway lane changing capabilities. They use a skateboard architecture which includes a base structure, housing, the batteries, electric motor and other electronic components. The idea is that they can easily make new models by putting different bodies on top of the existing skateboards. Even by this time there were dozens of new ev startups each trying to become the next tesla.

There is nothing particularly noteworthy about rivien that would lead anyone to predict. It would come to be worth 110 billion dollars within the next three years. They really started to gain momentum in 2019 when they received 700 million dollars of funding from amazon and other investors. At first, it seemed weird that amazon would invest in a new ev startup.

After all, they were in the e-commerce business and had no expertise in automobiles, but was actually a very strategic decision for the internet. Giant amazon spends billions of dollars every year on logistics. One of the most expensive parts of delivering a package is the last mile. Historically, amazon has outsourced most of its last mile delivery to third parties such as u.s postal service or ups in recent years, they've been building up their own last mile logistics fleet, where they will deliver the packages themselves by cutting out the middleman of usps and ups.

They can increase efficiency and dominate more of the value chain, but if they want to be completely self-sufficient, they will need hundreds of thousands or possibly millions of vans. Shortly after making the investment amazon signed a contract with rivium to purchase 100 000 fully. Electric delivery vans by 2030.: this was potentially a genius strategic move on the part of amazon, with them being both the largest shareholder and largest customer of rivien. They can collaborate to tailor the delivery van exactly to amazon's desired specifications.

From their perspective, the few hundred million dollars they shelled out to buy their stake in riven is chump change compared to the strategic relationship which could be worth billions of dollars over the next decade. Just a few months later, ford invested an additional 500 million dollars into the company at a valuation between five and seven billion dollars. They originally planned to partner with rivien to develop an electric vehicle under their luxury lincoln brand. However, they ended up calling off the partnership.

In the spring of 2020, due to uncertainty around the pandemic, having raised more than a billion dollars from blue chip, investors, including amazon and ford rivian, went full steam ahead on the development of their pickup truck in suv, with a plan to launch both of them. In 2020, but they ended up delaying the launch multiple times, blaming the pandemic and resulting semiconductor shortage. They started making their first deliveries in october of 2021 and by the time of their ipo, they had delivered a grand total of 156 vehicles, the majority of which were to rivien employees. But regardless of this fact, investors still decide.

This company should be worth more than 100 billion dollars and more than gm, which delivered almost 7 million vehicles last year. So who is so excited about rivian to bid its shares up so high? Surprisingly, even arc invests kathy wood said: rivien is overvalued and declined to buy shares. Wood made her name by buying high growth technology companies such as tesla. When most analysts on wall street said it had ridiculous valuations.

The fact that even kathy wood won't buy rivien makes you wonder who is buying the shares they raised more than 11 billion dollars from their ipo. Most of this came from large long-term institutional investors, including blackrock t rowe price and multiple sovereign wealth funds from around the world. Unlike amazon, these investors have no strategic relationship with rivian and are purely buying the stock as an investment because they think it's undervalued, but at a 110 billion valuation can this pre-revenue company really be undervalued. Tesla currently has a market cap of about 1 trillion dollars.

If rivien can eventually become the next tesla, the stock could theoretically 10x from there and with a 100 000 order from amazon, they certainly have credibility. The base case of rivien's valuation implies that they'll eventually have to grow into being, at least within the same order of magnitude as tesla in terms of scale. But how realistic is this rifian founder and ceo rj scarring says they plan to ramp up production to 1 million cars per year by the end of the decade? Currently, they only have one manufacturing facility in illinois which can produce a maximum capacity of 150 000 cars per year. They plan on expanding this facility, so it could produce 200 000 per year, but even at this expanded size they would need four more equivalent factories to achieve their 1 million vehicle production target.

They plan to use the ipo proceeds to do this, but have yet to announce any concrete plans. Rivien has 50 000 pre-orders for its consumer vehicles in order for 100, 000 delivery vans from amazon, but the amazon orders are spread out over 10 years. It's highly uncertain that they'll have enough demand to sell 1 million vehicles per year, even if they can manage to produce that many. Both the r1t and the r1s have a base price close to 75 000, putting them squarely in the premium end of the ev space.

It is also almost double the price of the tesla cyber truck, which is expected to make its first deliveries within the next year. Ford is also launching its fully electric f-150 lightning pickup truck in 2022, with a starting price of forty thousand dollars. While rivien's adventure vehicles may be high quality, there will be tremendous competition if they want to get anywhere near one million cars per year. They have to make cheaper cars, for example, tesla didn't start achieving scale until they launched their low price point model 3..

Just having a prototype is one thing: mass producing at scale is a whole different story. When tesla was ramping up production of the model 3, they had to go through production hell where the company had weeks where they came within single digits of bankruptcy. Through a combination of innovation and luck, they were able to snatch victory from the jaws of defeat and become the most valuable car maker in the world. Today, in its more than 10 years of existence, rivien has never made any meaningful deliveries if they want to get anywhere near scaring.

Just one million car target they'll have to go through their own version of production hell and it's far from guaranteed whether or not they'll be able to survive. This remember that they were forced to delay the launch of their flagship, pickup truck and suv models multiple times they blamed covet induced supply chain disruptions for much of this, but even had it not been for covid, there probably would have been other delays anyway. In a statement explaining the delays, they said, launching three new vehicles, while setting up a multi-vehicle manufacturing plant, is a complex orchestra of coordinated and interlinked activities where small issues can translate into ramp delays. It looks like they're already going through production hell and scrambling to make their target of 1000 deliveries for 2021.

They will have to increase the scale of their operations 1 000 fold to get to their 1 million delivery target institutional investors like blackrock and t rowe price are just as liable to fomo as everyone else. A lot of them probably missed out on tesla and now have to dumpster dive to buy speculative ev startups in the hope that they will become the next teslas thinking. Rivien will be. The next tesla is equivalent to thinking that wish.com will be the next amazon while anything is theoretically possible.

This probably shouldn't be your base case investment thesis. If rivian ipo'd a couple years ago, they would be lucky to garner one-tenth of their current valuation, but because of the general hype around electric vehicles, investors are now willing to buy just about any ev stock at just about any price. While it's true that evs are the future, it was also true that the internet was the future during the 1990s tech bubble, and we all know how that turned out. Alright guys that wraps it up for this video.

What do you think about rivian? Do they have a shot at becoming the next tesla? Let us know in the comments section below, as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.