Everyone meet kevin here. We need to do a deep dive on what rivien just told us today, we've got ta talk. Of course, this video is brought to you by the programs on building your wealth down below with a coupon code expiring. At the end of christmas day, take advantage of that before the price goes up again all right folks, let's get into what's going on here with rivian, so rivien delivered 386 vehicles through december 15th.

Almost all of those were delivered to employees all except 11., 11 r1ts were delivered to actual customers and two r1ss, which is the suv compared to the truck were delivered to customers. Rivien apparently produced 652 vehicles. In total they did only deliver 386 of those. So we do expect deliveries to ramp up here.

Nonetheless, production. Well, the production target of 1200 r1ts and 25 r1s will be missed. That is, rivian production will be less than 1200 units for 2021. reason.

For that being cited are supply chain issues no surprise here. They suggest that the supply chain issues they're facing are not long-term issues, but the problem is they have this issue of hey. We could have 99.9 of the parts, but if we're just missing 0.1 percent of the parts, we can't finish building the vehicles they're blaming a lot of the shortages. After having read the earnings, call on smaller manufacturers who are providing them parts who don't necessarily have the bandwidth or capacity during covet to add a second or third shift, which means they're not able to deliver these, these minor parts that are needed and without those components, The production line, shutdown there are rumors, and i want to make this crystal clear.

This is just a rumor, but there are rumors that production lines at rivian do shut down multiple times per day. This was not brought up in the earnings call so going back to what we stated in the earnings call back in the earnings call. We did have executives try to make it very clear that they are at the start of an s curve and that production is is slow at the beginning of an s curve and they're not wrong just for clarity sake, because not everybody might be familiar with an S-Curve, an s-curve is something that is very frequently referenced when you're a startup, especially if you're a manufacturing startup. So an s-curve of production is essentially a two-folded uh version of exponential lines.

So the goal is that you grow very slowly slowly slowly, but then that growth starts compounding and then you grow exponentially. That might be a little bit too vertical. Here probably look a little bit more like uh yeah there we go probably look a little bit more like this and then at some point you kind of reach an inflection point and that s is off, so your production starts growing less per year. So this is the phase over here where you might have high percentage returns in terms of oh, my gosh.

We did 1200 cars in 2021 and we had 10 000 in 2022. We grew 800 or whatever right. This is where you get those ridiculous percentage returns, which you should not look at for a starting company. You should look at actual uh cash flow, free cash flow and are they running a profitable shop or their margins going up right money? Losing companies in this market are very dangerous.

I've been talking about money, losing companies uh being the biggest target for sellers and short sellers, probably for about six to ten weeks now and jim cramer. Just today did a piece about how you should sell money losing companies which i think is interesting - that he's telling you that after everything's already fallen discounted substantially, but whatever uh so and then, of course over here. This is where you would expect to see those 100 sorts of gains where it's like. Oh wow, we're doubling doubling doubling or more than doubling right.

That's your exponential growth and then then your growth slows. Your growth goes back to oh, okay, we're growing at 20 percent. A year we're going 15 a year, four percent a year, whatever right goes down. Obviously, this is where your multiple is generally infinite.

When you do a pe, multiple calculation for these, which we'll do later for rivian in 2025, we're probably still going to be relatively early. If rivien survives until then, which it's worth noting that companies do not have to survive, okay, that is very important to remember but say riven does survive, which i expect it probably will, unless its products just horrible uh, which i don't i don't think but uh say They survive, you know by 2025, we we expect their forward multiple, probably still to be 300 here uh and then maybe you go to a hundred and then when you hit that inflection point. This is where you start going to like 50 35 right and that's how your multiple starts compressing as your growth goes down. This obviously makes sense, okay, good! So let's talk a little bit more about rivien and what we learned today.

So we know that we missed production numbers. We know that at in the after hours, rivien is down about eight percent, so we can see the uh chart for rivian right here. Earnings were today so uh. This is the after hours action here which, if we just zoom over here, we'll see that uh before we essentially, we closed at right about 1 108 109 and we did drop to a low of about 95 sitting at roughly 99 30 right now is where we're Sitting so just shy of a hundred dollars a share so uh now other things to note is that uh well, a big one here is that rivien said thursday that they're going to start delivering the first prime rivien vans to amazon this month.

This is really important. This is a critical milestone. We also don't expect that employees or amazon are going to be complainers about the initial deliveries of these vehicles. That is because both employees, who are likely paid, at least in some part in stock and amazon, which owns a substantial portion, i think in excess of somewhere around a 20 uh 20 stake uh and those numbers can fluctuate.

Given that now we're we're uh on the market and it's not entirely clear if amazon was able to sell on the ipo or if they're subject to lockups imagine a lot of their shares are subject to lock up either way. Amazon has a substantial stake in rivian and we don't expect that employees or amazon are going to complain about the product so probably not expecting any negative headwind from employee deliveries or amazon. The the most important ones are going to be those initial customer deliveries and probably uh kind of like with lucid. What you want to watch for are initial problems like do these things burst into flames right.

Did somebody get into an accident with it and get severely injured? Those are really really important and super critical when a company starts so do pay attention to that news cycle, though, if you look at a company like lucid, we haven't actually had those issues which you know knock on wood. You don't want those sorts of issues. Certainly, you don't want anybody getting hurt now. Rivian is also prioritizing the amazon van project over its consumer models, so they're using this uh, and this this was reported back in october.

So we already kind of knew this again, not a surprise, because you're gon na have probably a less complaining customer or a more understanding customer over at amazon than consumers, who are going to expect perfection and you're the 20th car off the line. You know well for consumers, that's that's going to be a high bar right anyway, uh uh! It is worth noting that both of the r1 models, the truck and the suv - had reservations at the end of october of about 55 400., we're now at 71, 000 reservations. We did have some negative news in this last quarter that ford ended their partnership with uh their their plan to build a joint vehicle with rivium. This is probably not necessarily a horrible thing ford's making its own electric pickup truck.

We've got um rivian, making their own electric truck, i'm not sure they really need each other. Ford has its proprietary skateboard for for their pickup truck, so whatever uh. Now. What i want to do, though, is is talk about uh, some big, well, a big red flag that i see and it's pretty important and we're going to talk about this red flag and then we're going to look at some notes as well from the earnings call.

We might look at the notes from the earnings call first, but i really want to talk about this red flag, but before i do, i just want to do a quick 20. Second shout out here. Thank you to masterworks for sponsoring this video check the link to them in the description down below. Remember that masterworks allows retail investors to buy fractional shares in high-end art.

It has almost all of today's most popular artists like banksy included, and, since you can buy fractional shares in modern art, you can invest in a multi-million dollar pieces of artwork for as little as twenty dollars now, traditionally, the only way to actually invest in these sorts Of pieces was, if you were rich well now you can, you can invest in essentially fractional shares and you can sell those shares on the secondary market that masterworks has as well for art or just wait until they end up reselling the actual uh investment uh. Now it's also worth noting that art by some measures has actually outpaced the s p 500, substantially for for the last many years and so do consider masterworks and some of your investments check that link out down below and thanks masterworks for sponsoring this okay. So let's look at the earnings call and then i want to talk about the red flag. The earnings call does contain a reference to this red flag.

So for the time being we're just going to skip over that uh. I just want to highlight a few things here that are worth noting uh as a rivian investor and then we're going to keep going here so uh. We know that motor trends name the r1t, the truck a motor vehicle of the year uh. Personally, i don't really care about these sorts of uh rewards awards.

I don't care what matters to me is consumers buying the product that is, that is the ultimate uh selling feature for me. Uh. It's also worth noting that in early 2022, they plan to complete the certification of their electric delivery vehicle 500, which is narrower and shorter than their 700, but their goal right now their priority is to get the r1t the truck, the suv and the 700 for sale. This year, uh worth noting that they're already working on developing essentially their second line and getting that certified for the electric delivery vehicle.

I do get a little bit concerned. This is not the red flag. I want to talk about, but it is it's something that i do consider i do get concerned if too quickly, you start thinking about uh, so many different lines of vehicles that you could, especially on one manufacturing plant, that they have right now. You could really spread yourself too thin uh, i, that is probably one of the biggest issues for companies, in my opinion, is that they hire too quickly and they try to grow too quickly and it's a really good way to go bankrupt again.

I'm not suggesting that i think rivian is at risk of going bankrupt, but this is something that i do want to pay attention to. It's something that does make me nervous now, uh, it's possible that we're pulling a tesla approach here and we're going to use a lot of the same parts now. This is the motor trend, video on the r1t and one of the things that i have to say. I appreciate it so far, at least from the research that i can do from a desk is that it does appear that the r1t, along with the r1s, the suv and the truck, do use substantially similar interiors.

Oh and i love that they have actually have a coat hook on the back of the chairs, unlike the teslas but anyway substantially similar interiors is very important so that way, you're using consistent parts you're still going to have substantially different exteriors on these vehicles, but the More, you can standardize the parts on the inside the better, very, very important to keep that margin up and that's going to be something critical for valuing rivian as we go forward. So what else can we glean from the earnings call? Well, we find out that uh. They do not believe that their supply chain issues are going to represent long-term uh issues, we're going to uh it's worth noting that for their georgia factory, they expect to eventually get to a target capacity of 400 000 units there and i believe 200 000 is the Goal for their normal illinois facility, which they have open now per year, keep in mind this is going to take a while to ramp. I i would guess, for a new factory that they open up in 2024, which is the estimate, barring delays, probably take five years to get to a full ramp.

There i mean, even if you did it in three that'd, be very impressive. That's just a note about them. Having delivered their first 11 vehicles. Second plant, we'll talk a little bit more about this in just a moment.

Here's the 99 argument with the uh supply shortages. So no real surprise. Here we do get a comment that this was quite interesting, that close to 90 of the customers for the r1t have never owned a truck, and that was very interesting and the vast majority have never owned an electric vehicle. So that was quite an interesting comment.

That came from here, the vast majority have not owned an electric vehicle and 90 have never owned a truck. So they're really appealing to potentially this this new audience, which i'm not sure, if that's good or bad, that maybe you're not converting truck enthusiasts. But it is always good to open up your market, the uh amazon deliveries. They they do, expect that to come out uh this month and they're going to ship that with the fleet os, and that is one of their big selling features which they'll be charging for.

On sort of a monthly subscription basis after an initial trial period, so i think i think you get one year free connectivity with them. Okay, so this is the earnings, call now keep in mind anytime. You look at the investor presentation, these sort of pamphlets, that they hand you in the shareholder letters and all this. This is designed to be marketing right.

This is designed to get people excited about a company or brand, and i generally recommend being very skeptical. When you read this one of the things i wrote down over here, which actually spawned uh. My thought process was okay, so if you have 10 000 plus employees as of december 15th, that means if, if you pay all of them, an average of 50k plus stock based comp stock based comp is obviously dilutive. But, let's just say: 50k: that's 500 million a year, you're spending 40 million dollars a month in employees uh! Your your burn is is something to consider now: 40 million a month for a company.

That's burning that just burned over 1.3 billion in a quarter is a drop in the bucket, so the employees are not going to be your main cost driver here, but there are going to be some other things that are cost drivers. Okay. So there are a few things written down here on the balance sheet that i want to talk about. First, it's worth noting on their first introduction to the market essentially to public markets.

They raised 11.9 billion dollars via an ipo, the company's worth about 92 billion dollars. Right now they raised 11.9 via ipo. This is great. This is your first two raw.

This is when we get the excitement. The thing goes to the moon and then the momentum dies and it falls back down we're down from you know, 170 back to 98 or 99, where we sit right now about a 92 93 million dollar billion dollar market cap. Excuse me uh something that i do think is going to be a headwind in addition to the headwind that we got today, which was misproduction, keep in mind, we're going to miss production in other quarters. The supply chain issues that we're facing we're going to face.

Until probably the beginning of 2023, when things really start getting, ah a lot, a lot more relaxed, it's still gon na be tight in 2022.. So i do expect probably for the four quarters of 2022 production to be honestly a nightmare. It's going to be so annoying and people are going to be so frustrated with rivien, uh and, and the same would be true for even lucid, and this is very, very normal. The beginning of the s-curve is a nightmarish and if you're going to be an investor in rivian, you really got to have the the cojones to to huddle through that it's gon na be hard, but anyway, right now one of the things that concerns me a little Bit is, after their 11.9 billion dollar, raise we're only sitting on 5.1 billion dollars of cash.

Now i understand they use some of the money to expand their ppe, which is their property plant equipment. They use some of the money to purchase more consumables uh. Presumably these current assets that they have here, uh and and uh. Well, i mean you use your money when you when you're running a business right, but the problem is at how is how much they're burning, because they're trying to build out their sales centers they're they're? Looking at other real estate for expanding uh, their charging network they've got so many candles burning at the same time, it's sales, it's the charging network, it's the advertising platform, it's actually the manufacturing and the hiring and the training and the supply chain relationships.

Uh. Finding different vendors when certain ones don't work out for certain portions of the assembly process. Switching vendors is a nightmare. It's a disaster! Everything takes longer than you expect anyway, when you put all of this together you're in a situation where okay cool we've got 5.1 billion on the balance sheet, but wait a minute we're burning 1.3 at the moment per quarter.

If you burn 1.3 per quarter, then you know you just do a simple 5.1 divided by 1.3 and you start realizing. Oh y'all, not gon na make it four quarters you're not going to make it through 2022 without having to raise money. That's fine! We expect the company to raise money. It's just that's going to be another headwind, which is a problem because when a stock starts going down, here's what happens when when a stock starts going down, so i'm going to say, starts fall right.

Okay stock starts its fall. Traders exit, then the companies try to do a fund raise now you get hodlers who exit because they see the price fall because of the dilutive nature of raising money. You're, creating you're, introducing more share supply to the market, so uh stock price tends to go down even though you're you're, just basically creating more shares but you're, giving people more cash. You still have some form of a market dilution that occurs, and so that's where you get some huddle folks who exit and, in my opinion, that's usually the time you want to buy is when the traders are gone.

The euphoria is gone, the hodler's exit and that potentially for me, is going to look a lot like this we're going to get a miss here on q3. Let's call for uh, you know, probably you know a miss when they when they report their q4, but we're already kind of pricing that in but then we would be looking at forecast for for q1 when this comes out, because that'll probably come out in in february Or march or whatever, and so if we miss, you know, guidance for q1, then we'll have a double miss and i would guess, by before march, the company's probably going to want to do a race uh. In fact, if i were this company, i would actually want to do a raise before they report a potential miss for q4. So i probably want to do a raise over here in, like january or february, and the reason for that is, i want to raise money, while the stock price is still higher uh.

Obviously, it's easier to raise more money when the stock price is higher and and then potentially report bad news uh. So that way, you've raised your money at that higher valuation, and then you know if the stock price sells more, that sells off more fine. It just creates a buying opportunity, so for me, i probably want to try to get in uh after a raise and - and maybe after the next set of bad news, because we know here's what we know with certainty. We we know this company's not gon.

Na 5.1 billion dollars is not going to cut it because, in addition to them having a cash burn of 1.3 billion dollars right now, they also want to build a five billion dollar factory, and even though you could get financing, it's not like buying a house where You're, going to put 20 down construction financing, sucks you're, probably going to have to burn a few billion dollars just to try to get this thing started to acquire the land. It's going to cost you money up front. I don't know if you're going to be able to get financing on that until it's actually been improved, certainly wouldn't get as desirable financing until it's actually been approved. So maybe you can get a construction loan, but those are at least 50 down in many of these cases, sure you can get incentives.

This is going to help fort worth, offered them 440 million dollars. So we're expecting that georgia probably offered them more money, but it's not like the state's just gon na fork that over up front, usually they just give you tax breaks or or some form of credit once you make progress right. So my guess is if they're trying to break ground in mid-2022 on their georgia facility, they're gon na have to raise money, possibly multiple times in the first half of 2022.. So i do think you have more headwinds than you do have positive catalysts for rivian right now and one of the things that concerns me is that they're even trying to do this other facility.

Now i know it's exciting and it's sexy to announce another facility, but you won't believe it, but they actually asked that same question in the earnings call, and i thought it was brilliant when i saw it. Oh, it's actually right here. Look at this one question on capacity expansion: this is an analyst who's saying this right. I thought the idea was to ramp up normal.

That's normal illinois, normal illinois plant ramp that up first to see if everything works and what doesn't work oops and then use those learnings to optimize a selection in the architecture of your second plan. So why expand so soon if you're still learning and their response was? This is a key element of how we've thought about cascading, the programs and how we architected the product development organization to be capable of not only running more than one program and launching more products. At once, but also have those feedback loops between the different programs. Listen, they said nothing.

What that whole paragraph was bullcrap. Okay, then they talk about hey. You know we're learning things about the van and uh. Then they say uh here, the last line.

Let me just read the last line here: you can pause it here if you want to read the whole thing, but we'll certainly learn from what we're doing now on the r1 platform and where we're doing the rcv platform and recognizing that those programs fully develop, and Then launch what you see in terms of the second facility in georgia. This is really key for us for an expansion point of view in the time scales associated, bringing the plant online really require us to. Despite that work, as you heard earlier or whatever like honestly like, i don't know if the transcription was messed up, but i didn't really get an answer there. Uh i got.

I got like a a total misdirection on like oh well, we're we know what we're doing. Uh unidentified participant here just as a follow-up feedback on earlier bills that you've been delivering uh, what's going on where there's issues and how you've been addressing them. You know this is vehicle quality when you first invite customers right - and this is why they tend to give these vehicles to friends and family and employees right, but they didn't really give us any kind of answers on other issues that they're having there. They kind of punted on that one as well.

So it's when i get these kind of punty answers that i do get nervous that they haven't really fully thought it out either. I think honestly, this 5.1 billion dollars is burning a hole in their pocket and they're. Like oh my gosh, let's, let's just go, do another factory yeah yeah yeah, then then we can then we can have more potential production, which makes sense, because you know people value companies on on future potential. I mean it's one of the first things they put over here in their investor presentation, but i have to be really real here.

I'm concerned that you're going to have more uh headwinds for this company substantially in the first half of 2022 and if they run let's just let's just go through a worst case scenario. Here, let's say uh: they they missed their q. Few q one production goals because they they announced that they're behind as well at the beginning of the year and and they just keep missing so the stock goes down to say: 50. Okay, just as an example say it's a now: a 50 billion dollar company.

Okay. Well, it's still a decent valuation. I mean that's like a lucid you'd, still raise money, uh they're going to be able to raise capital, so i'm not really worried about their ability to raise cash. I think they're going to be okay.

I think hodlers are not going to love all the cash cash raising that's going on, but they're going to raise cash like crazy. I think the bigger concern i have is that, even though they have the capacity to raise cash, they're not going to go bankrupt unless the stock goes down under 20 and it becomes impossible for them to raise money. That would be check me that that's that's! When you turn into like a canoe, i hate to say it, but i have big concerns for canoe, because how are they going to raise capital? The thing just keeps getting cheaper and cheaper and cheaper, but as a as an investor here you got to ask yourself: do you want to hold through that now or do you wait until the company's actually proven that in normal illinois, they're able to produce vehicles at A decent margin and remember folks, even though they're trying to get out you know maybe 800 vehicles this year and and maybe they're trying to they're, going to try to get 20 000 out next year or whatever look at a company like neo who partnered with an Existing chinese manufacturer to manufacture vehicles in 2019. They they got 20 000 vehicles out in 2020.

They got 40 000 vehicles out. You know now we're. Finally, in 2021, at a place where uh they're they're delivering you know on average, probably eight thousand vehicles, because they did have a you know, one month where they were shut down at a really terrible delivery month. I think that was october uh, but but you know, ramping is relatively slow.

This is three years and you're going from 20 to 40 to what maybe 80 90 100. Maybe hopefully they break a hundred thousand this year. Ah, here you go neo delivered about 80 940 vehicles in 2021. So far as of december uh.

First so say they deliver another 11 000 here we'll be at like 91 000 or something like that, which is fine. That's that's! That's fine growth! Don't get me wrong. I love that uh, but it's still a little bit of an issue because look at this folks, 20 to 43 to 90 kind of slow right and that's neo who's partnering with somebody else for manufacturing. That already has the manufacturing progress and skills.

So if we now jump on over to a spreadsheet on rivian - and let's say we're really generous - let's say they can do 25 000 in 2022 and then they double it and they do basically a neo-style ramp 50 to 100 and then they get to 160.. We'll we'll modify this a little bit: okay, 160. At a 50 000 revenue per vehicle. Now the lifetime revenue per vehicle is expected to be somewhere around 66 000, but they're not going to get that right away.

That's lifetime with charging and all that. So i'm just going to discount that out, i'm taking that out and i'm going to go ahead and run them with a 25 gross profit margin which i think is very very generous. It took neo years to get to this, but but let's say they, you know. Okay by 2025, we get to 25 gross profit uh after taxes and all of this, using a 300 300 uh forward.

P e ratio - we're maybe at about a price of 163 here right but watch how quickly this could get destroyed if their expense on sales or their gross profit goes down by about five percent, so their expense on sales rather than being 75 is 80. Then then, the stock price literally falls by by well two thirds like that. That margin is critical, and so that's why? Because margin is so critical. I question a little bit the wisdom of building another factory before you've actually really ramped up your normal illinois plan, and not only have you not ramped up your normal illinois plan but you're trying to do two different styles of electric delivery vehicles, an suv and a Truck four different vehicles out of one plant remember: tesla started with the model s, and then they did the model x years later right.

These things concern me. I love rivian. I think it's a sexy car. I think the company has a lot of potential, but it also has a lot of headwinds, so i'm nervous i'm not invested in rivian.

I want to be invested in rivian, but i think i've made clear in this video where i would invest and where i wouldn't so anyway. These are my thoughts on rivie and hopefully this was helpful to you and folks we'll see in the next one thanks. So much for watching, if you, like my perspective, check out my programs on building your wealth link down below thanks bye.