Rivian IPO: How does RIVN’s first week compare to TSLA’s?

If we’re looking at first-week performance only, RIVN is DRAMATICALLY outperforming TSLA...

Tech (1)

By definition, it’s not every day or even every year (heck, it’s barely every decade) that you see the biggest IPO in nine years.

As my colleague Ben Lobel noted in his initial pre-IPO article, Rivian Automotive (RIVN) raised nearly $12B based on its official IPO price of $78/share, the largest amount raised since Facebook’s (FB) $16B in 2012. While this figure is staggering, Rivian may nonetheless have left billions on the table based on the first week’s price action!

As the 15-min chart below shows, RIVN’s first trades went off near $107, and the stock has surged from there, closing yesterday’s trade above $172, up more than 120% from the $78 IPO price!

cirivndailychart11172021

Source: StoneX, TradingView

How does Rivian’s first week of trading compare to rival Tesla’s?

To answer the above question in a word: Favorably.

Elon Musk’s EV behemoth is the paragon that all the nascent EV startups seek to emulate, and based on its first week of trade, RIVN is ahead of the pace. Turning our calendars back to June 2010, Tesla Motors priced its IPO at a (split-adjusted) $3.40 per share, saw an IPO-day spike to nearly $5, then faded throughout the rest of its first week to close at $3.22, below its IPO price. Of course, that ultimately marked essentially the lowest price that TSLA shares ever saw, but if we’re looking at first-week performance only, RIVN is dramatically outperforming TSLA.

Rivian’s first-week surge in context: What does it mean for markets and the global auto industry?

As we’ve seen throughout the last couple of years, RIVN’s IPO reinforces that traders’ demand for fast-growing companies in innovative industries is insatiable, regardless of whether they’re currently profitable, and the recent bout of higher inflation is doing little to dampen that appetite.

The more interesting questions raised by the IPO related to the global automobile market. Looking at the market capitalizations of the 10 largest global auto companies, a clear trend emerges (EV-only manufacturers in italics):

  1. Tesla Motors: $1,089B
  2. Toyota: $259B
  3. Volkswagen: $136B
  4. BYD: $133B
  5. Rivian: $125B
  6. Daimler: $108B
  7. General Motors: $92B
  8. Lucid Motors: $87B
  9. Ford: $78B
  10. Great Wall Motors: $70B

For reference, electric vehicles accounted for just 2.6% of the global auto market in 2020. In other words, with four EV-focused automakers in the Top 10 (and 3 in the Top 5!), it’s clear that EV manufacturers are punching way above their weight. In essence, it appears that traders are essentially valuing the gas-powered segments of incumbent automakers at zero and viewing the global vehicle market as purely a race to produce EVs at scale.

The biggest risk to this perspective is that manufacturing intricate machines like modern vehicles at scale is unfathomably complex, and current market valuations are suggesting that young upstart EV manufacturers like Rivian and Lucid will be able to scale up to mass production smoothly, or at least more quickly than legacy automakers with decades (in some cases more than a century’s worth) of experience can retool to producing primarily EVs.

It remains to be seen whether that will ultimately be the case, but after Rivian’s impressive first week, it’s critical for traders to understand the narratives and competitive dynamics at play in the broader industry.

How to trade with City Index

You can trade easily trade with City Index by using these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.