Long-time Market Junkies know how I feel about the Rivian IPO.
But in case you’re a new reader, Rivian makes electric SUVs and pickup trucks that rival Tesla Inc.’s (NASDAQ: TSLA) Model X and Cybertruck.
Rivian’s R1T all-electric pickup truck promises over 400 miles of driving range combined with acceleration times comparable to a supercar. And its R1S SUV does the same.
Commonly referred to as the “Tesla Killer,” Rivian is backed by some of the greatest entrepreneurs and long-term institutional investors in the world…
The list includes T. Rowe Price Group Inc. (NASDAQ: TROW), Ford Motor Co. (NYSE: F), and Amazon.com Inc. (NASDAQ: AMZN)… Just to name a few.
During its second to last capital raise in December 2019, these institutional investors valued the firm at $7 billion.
That’s when T. Rowe Price lead a $1.3 billion investment round into the company.
To date, Rivian has secured $5.6 billion over the course of 8 funding rounds. That includes the $2.5 billion round announced Friday also led by TROW, F, and AMZN (at an undisclosed valuation).
In my opinion, these institutional investors make Rivian an intriguing long-term buy and hold after its IPO…
That’s because these institutional investors are unlikely to sell once the 90-day “lockup period” on Rivian expires following the date it goes public.
Another thing I like about Rivian is that Jeff Bezos and Amazon are not only investors… They’re also the company's biggest client.
After Bezos visited Rivian’s headquarters last fall, he agreed to buy 100,000 electric vans for Amazon’s delivery services.
He did that for two reasons:
- Amazon is working to become delivery self-sufficient to save on costs incurred by having to outsource delivery to FedEx, UPS, or the USPS.
- And Amazon has committed to becoming carbon neutral by 2040. As you could imagine, switching from gas to electric vehicles is a big part of the plan to reduce CO2 emissions.
The probability that Jeff Bezos and Amazon let Rivian fail is slim to none. Bezos is incentivized to keep Rivian running because he is the biggest client and one of its biggest shareholders.
Rivian clearly has a bright future ahead…
But since the company is not public yet, what can you do now to capitalize on the gains that Tesla and other electric car makers are experiencing?
Well, you could invest in Tesla. The stock is up 318% since December 2019 (when Rivian took in $1.3 billion during its latest funding round).
If Rivian increased 318% between Dec. 2019 and now, its total market cap would have increased from $7 billion to a little over $29 billion.
In fact, I believe that Tesla has directly contributed to the massive successes of its competitors. Tesla is like the “tide that lifts all boats” with it.
It’s similar to how all tech stocks rise when the Nasdaq goes up or all cryptocurrencies rise when Bitcoin goes up…
Tesla competitors go up when Tesla goes up because they have positive correlation together.
In case you missed it, here are Tesla’s 3 biggest public competitors today.
They’re all up massively for the year.
And one is already up 94% since I recommended it last week…
Wrapping Up with Rivian
There’s no getting around it – it sucks that individual investors like you and I aren’t able to experience the insane gains private investors are enjoying with their Rivian stock.
Rivian is my second favorite electric car maker after Tesla…
If Rivian went public today, I bet they would price new shares around a $30-$40 billion valuation.
That means you and I would have missed out on 328% to 471% returns.
But let’s not focus on what we can’t control…
Let’s look forward and see what we can do about it going forward based on the probabilities…
When I take a look at TSLA’s chart, I count 9 times the stock has dropped more than 33% within a couple months.
So, it’s not a matter of “if” but “when” the electric car sector experiences another correction.
At the same time… Could TSLA go to $2,000 to $2,800 per share before the end of the year?
It certainly wouldn’t surprise me. That’s why I wouldn’t recommend selling any of the TSLA stock you own now.
But I wouldn’t be adding to your position just yet either…
You see, the number of put options buyers in TSLA has never been higher than it is today.
That means a lot of the “smart money” is expecting a drop soon. And when Tesla and its competitors do drop, you can bet I’ll be scooping up shares of all 4 companies on the cheap.