Rivian - another EV darling? The next Tesla? Or the next dot.com bubble?

Updated: Nov 24, 2021

Shares of EV start-up Rivian spiked on second day of trading and closed at USD 129.95. Rivian is now the biggest U.S. Company with NO SALES.

Will it be the next Tesla?

Image credits: https://rivian.com/r1s

Is the valuation fair or its just magic fairy dust driving the market?

To put things into perspective, I have compiled a side by side comparison of all the EV companies:

Based on what we can see from the table above, Rivian market cap of USD 110.8B is larger than Nio's USD 65.1B. Nio has delivered 83,748 vehicles. Rivian has sold 0 vehicle.

Similarly, Lordstown Motors and Nikola has sold zero vehicle (and Lordstown has recently announced to pushback their deliveries of its Endurance pickup trick due to component and supply-chain issues.)

It is worth noting that at this time of writing, Nikola's billionaire founder, Trevor Milton, was criminally charged with defrauding investors by allegedly lying to them about the electric and hydrogen powered trucker maker.

Out of these 5 EV companies that I have picked out above, 3 of them has 0 deliveries. And their market capitalisation are all in billions. Also, I have included Net Equity to show the deviation of the market capitalisation from the Net Equity. Traditionally, share prices (market cap) are often reflective of the Company's performances.

Tesla is the only profitable company and PE ratio is at a whopping 335.

Using the index SPY as a fair benchmark, SPY PE ratio as at 13 Nov is 29.50.

Image credits: https://www.multpl.com

During the dot.com bubble, investors were eager to invest, at any valuation, in any dot-com company, especially if it had one of the Internet-related prefixes or a ".com" suffix in its name. Venture capital was easy to raise and investment banks profited significantly from initial public offerings (IPO), fueled speculation and encouraged investment in technology. A combination of rapidly increasing stock prices in the quaternary sector of the economy and confidence that the companies would turn future profits created an environment in which many investors were willing to overlook traditional metrics, such as the price–earnings ratio, and base confidence on technological advancements, leading to a stock market bubble.

Does this sound familiar to the current EV hype?

Just mention "EV" and investors are currently now eager to invest at any valuation.

Also, right now, capital is now easy to raise. Of the roughly $75 billion in VC-backed global mobility deals this year, the majority had participation from corporate venture capital (mainly from the auto sector), according to PitchBook data.

Credits to: pitchbook.com

Also, investors do not look at fundamentals suck as PE ratios or profitability (apart from the 3 companies with zero products currently, the only other EV company that manage to deliver, NIO, is not in a profit position currently). Neither do they care if technological advancement growth in this EV industry is really sustainable nor can companies ultimately deliver the EVs that they promised.

This is not a financial advice so please do your own due diligence when evaluating an investment decision. Please feel free to reach out to me under "Contact" if you have any comments.

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