Electric car company Rivian saw its stocks jump 29% on its first day of public trading last week and is now the second-highest valued U.S. car company, even though it has yet to record any official sales and has raised concerns with experts about its growth potential.
“Though Rivian expects to lose money for the foreseeable future, its initial public offering was the biggest of 2021 and put its valuation ahead of such legacy automakers as Ford and General Motors,” reports the Washington Post. That makes the company “an immediate frontrunner in the next-generation auto market.”
Investors flocking to buy up Rivian stock are hoping to find the next Tesla, which has a value of US$1 trillion and is expected to sell nearly a million cars this year. Rivian, by comparison, expects to sell one million cars within the decade, and is still a long way from showing that it will be able to increase production to keep up with expectations. Investors may lose confidence if the company fails to do so, The New York Times says.
“Despite lofty valuations and ambitions, the company is tiny. Its goal is to produce 1,000 electric vehicles this year,” writes CBC News. “While the company has yet to record any revenue from vehicle sales, regulatory filings suggest it does have 5,400 orders for its vehicles already logged.”
Rivian does have the support of some powerful industry players. “Ford is one of Rivian’s high-profile backers, having invested a half-billion dollars into the company in 2019,” says CBC. Amazon acquired a 20% stake in the company before it went public, and is “poised to be its biggest customer, as the e-commerce giant wants to use Rivian vehicles in its delivery fleet.”
In spite of the company’s small size, investors are hoping to cash in on its potential as the demand for electric vehicles grows. But some spectators caution against giving in to market hype.
“Despite the popularity of the electric vehicle market and huge gains in Tesla’s stock, we think investors should avoid the temptation to buy Rivian shares,” warned investment research firm New Constructs.
CBC says the research firm took a look back at Tesla’s earlier days, noting that the company lost stock value when its production capacity couldn’t keep up with demand. But Tesla entered the market valued at US$1.7 billion and was already selling vehicles to customers, unlike Rivian.
“To buy the stock at such a high price before the company has shown it can consistently produce more than a handful of cars seems ridiculous to us,” New Constructs stated. “Investors shouldn’t buy a stock just because it’s in a hot sector.”
