Last week the long-awaited IPO of Rivian Automotive (NASDAQ:RIVN) turned into the largest public listing of the year. The Rivian share price is up nearly 71% since the company was listed. And its market capitalisation now sits around $150bn. That makes it one of the most valuable auto companies in the auto industry, even larger than General Motors and Ford.
What makes Rivian Automotive more appealing is the support from Amazon and Ford. Both companies have invested vast amounts of funds in the electric vehicle startup. With all this being said, let’s look at the IPO and what’s next for the Rivian share price.
Rivians blockbuster IPO
The company sold over 150 million shares at an IPO price of $78. This allowed management to raise over $12bn at its public offering. But when the stock opened on the NASDAQ to retail investors, enormous interest erupted, sending its share price to over $100 on its first day of trading.
Since then, the EV stock has continued its upward trajectory and now trades at around $170. But does this price make sense? The electric vehicle industry is getting a lot of attention from investors. And Rivian is certainly proving to be popular. However, despite what a $150bn market capitalisation suggests, this business isn’t generating revenue yet.
The Rivian share price is being massively inflated by the expectation of future growth. And looking at the specification of its flagship vehicles for both consumer and commercial applications, the company looks like it has the potential to deliver. But it has plenty of challenges to overcome first.
Whether management can meet the exceptionally high expectations from investors has yet to be seen. However, given the enormous valuation being placed on this business, I think the slightest sign of trouble could send the stock plummeting.
The challenges that lie ahead
As of today, Rivian vehicles are not in the market yet. The R1T is expected to be in the market by the end of 2021. Successfully completing the first product launch is critical to retaining its inflated share price, in my opinion. And that may prove challenging as there is an enormous level of rising competition in the electric vehicle space. But its vehicles do have some impressive capabilities regarding speed and battery life which may give it an edge.
Furthermore, this company is still in its infancy as a business with no records of profit. And at the current Rivian share price, it has to produce better than the general market returns to remain attractive, in my opinion. Only time will tell whether management can accomplish this.
Final thoughts about the Rivian share price
All things considered, I think Rivian has the potential to become a leader within the electric automotive industry. However, the Rivian share price is simply absurd. With such high investor expectations, I wouldn’t be surprised to see this stock crash at the slightest sign of trouble. Therefore, I’m keeping it on my watchlist for now.
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Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned at the time of writing. Views expressed on the companies, assets and strategies mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.
