Here’s a starter for 10. Is Rivian: a) a minor character in The Hobbit b) the name of Gwyneth Paltrow’s youngest child c) an electric vehicle maker that has taken Wall Street by storm?
As keen investors will already know, Rivian is a company being hailed as the biggest thing in electric vehicles since Tesla.
Despite the fact many people have never even heard of it, the company floated on the Nasdaq market in the US last month, and is now valued at close to $100billion or £70billion.
Out front: Rivian founder RJ Scaringe and the company’s all-electric R1S SUV which starts at $70,000
That’s still well below Tesla, which has a market value of nearly $1.1 trillion, but phenomenal nonetheless.
So is the excitement justified? Should UK investors dive in, or is Rivian’s rampant debut a sign that the mania for electric vehicles (EVs) is about to go screeching into reverse?
The share sale in mid-November was the largest since Facebook came to market nearly a decade ago and put a higher value on Rivian than on US auto giants General Motors and Ford, which somewhat ironically is one of its backers.
This is despite the fact Rivian has never made a profit and has delivered hardly any vehicles.
The company has one very big trump card, however: Jeff Bezos. Amazon, which he founded, is the largest investor, with a stake of 22.4 per cent.
The online shopping giant was one of the earliest big backers. It has placed an order for 100,000 vehicles and the hope is that with Amazon as an anchor customer, other lucrative orders will follow.
Already, it has been quite a journey for Rivian since it was founded in 2009 by Robert Scaringe, who likes to be known as RJ and who is still only 38.
One reason the shares have taken off is Fomo – or ‘fear of missing out’ – as investors who didn’t manage to cash in on Tesla see Rivian as an opportunity to make up for lost ground.
Russ Mould, investment director at stockbroker AJ Bell, says: ‘There is a lot of money looking for a home now and many people think Rivian is the new Tesla.
‘Remember, though. Rivian has never made a profit and it has only sold a handful of trucks. Contrast that with Ford, which is forecast by analysts to generate more than $120billion in sales and nearly $6.billion in net profits in 2021.’
Although the two are often compared, entrepreneur Scaringe, who is an outdoorsy family man, seems the antithesis of Tesla’s founder Elon Musk. Musk, 50, has made a virtue of eccentricity and has a colourful private life.
A former beau of Johnny Depp’s ex Amber Heard, he recently ‘semi-separated’ from wife Grimes, 33, a Canadian singer with whom he shares a young son named X AE A-XII Musk, or Baby X for short.
Clark Kent look-a-like Scaringe, who has a doctorate in mechanical engineering from Massachusetts Institute of Technology, seems almost preternaturally normal. Even Rivian’s 2.6m sq ft assembly plant is based in the town of Normal, Illinois.
Married to Meagan – with whom he has three sons – since 2014, he is vegan, is mad on mountain biking, and rather than Musk’s incendiary tweets, he posts wholesome pictures of himself camping with his family with a big yellow tent stowed on their Rivian truck.
High voltage: Tesla has a market value of nearly $1.1 trillion. Its founder Elon Musk (pictured) has made a virtue of eccentricity and has a colourful private life
Scaringe presents himself as an eco-evangelist. ‘This is a once-in-a-planet situation where, for the first time, a single species has the potential to change the make-up of the planet for all time forward,’ he told investors.
In a less environmentally conscious age, Scaringe would have been called a petrolhead.
The son of an engineer, he has been obsessed with cars since boyhood but says he felt ‘conflicted’ by the damage they did.
‘Ultimately, I decided to focus my life on helping to drive our transportation system toward a future state that was sustainable and carbon neutral.’
The fact this worthy goal could also be immensely profitable goes unsaid. Scaringe himself could make a personal fortune of up to $14billion from his shares and options, if the company performs. Investors could be well-rewarded too, if it all goes to plan.
There is no doubt about the scale of the opportunity. Bloomberg New Energy Finance believes that by 2037, EVs will be more than half of new vehicles sold.
Janet Mui, of Brewin Dolphin, points out: ‘This stock is not for everyone but you are buying the prospects of a huge potential market.’
To look at Rivian’s website, though, you would barely grasp that it makes vehicles at all.
Photographs of production lines or car plants are conspicuous by their absence.
You could easily assume the company was plugging exclusive family adventure holidays.
The site is big on saccharine-tinged pictures of mountains, forests, deserted roads, hip young parents and slightly icky claims it is building ‘the kind of future our kids and our kids’ kids deserve’.
At a price. The ‘vehicles made for the planet’ include the R1T electric truck with prices starting at $67,500, and the R1S SUV, starting at $70,000.
And for all Rivian’s upscale eco-warrior vibe, competition in the EV market will be ferocious.
Nissan, which has put its Sunderland plant at the heart of its £13billion push, has unveiled a small electric SUV and a cute pick-up truck, the Surf-Out, that looks quite similar to the R1T. Ford, as well as being a top investor, is likely to be a formidable rival. So is Tesla.
German car maker Volkswagen is planning to spend £31billion on battery EVs in the next five years and to launch 70 all-electric models by 2030.
And let’s not forget China, the world’s biggest car market, where home-grown EV companies are springing up.
Enthusiasm among shareholders, however, has not been dimmed by the fact that China’s EV group Nio was on the verge of bankruptcy last year.
And investors in Nikola, which makes electric lorries, have had a nail-biting journey since it floated on Nasdaq in summer 2020.
Shares tanked following a report from short sellers Hindenberg Research, alleging ‘an intricate fraud built on dozens of lies’.
The US markets watchdog, the Securities and Exchange Commission, and the Department of Justice are investigating and the founder, Trevor Milton, 39, resigned – though he has disputed the claims.
No one is suggesting any such problems at Rivian.
But the episode is a warning to investors that it pays to be careful in this sector.
Shares in Rivian, and others of its ilk, could also fall out of favour if the tech and green share surge runs out of steam.
Rewards at Rivian could be rich but no one should invest in the EV market in the expectation of a smooth ride. Buckle up.
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