Pre-market stocks: Rivian is the largest US IPO since Facebook
What’s going on: The company valued its stock above the expected range of $ 78 apiece, raising it around $ 11.9 billion. This is the biggest gain for an American company since Facebook made $ 16 billion in 2012.
The initial public offering is the world’s largest of the year and the 12th-highest on record, according to data provider Refinitiv.
The shares started trading at $ 106.75, a jump of 37%, before closing the day up 29%. That valued Rivian at nearly $ 86 billion, more than General Motors, which has a market value of $ 85 billion, and Ford, which has a market cap of $ 80 billion.
The only automakers lagging behind by Rivian are the owner of Tesla, Toyota, Volkswagen and Mercedes-Benz, Daimler.
There is a huge market opportunity as the world tries to wean itself off its dependence on fossil fuels. According to the International Energy Agency, there were 10 million electric cars on the roads by the end of 2020. By 2030, that number could rise to 145 million or more if governments meet ambitious climate targets.
Investors see Rivian as a prime candidate to take advantage of this change. The company has an agreement to deliver 100,000 vehicles to Amazon by 2025. It may also try to strike deals with other logistics companies.
“Rivian’s order flow and Amazon’s support are key validation signals for investors,” said Asad Hussain, senior emerging technology analyst at PitchBook.
But Rivian is far from a mature company. It didn’t start producing and delivering vehicles until September (yes, two months ago). And it faces huge challenges to scale up manufacturing in an environment that baffles even the biggest players.
The valuation of the company “involves a ridiculous amount of production” over the next decade, David Trainer, CEO of research firm New Constructs, told me.
Rivian must produce more than a million vehicles by the end of the decade to justify his rich valuation, according to Trainer. Tesla, which began production in 2008, shipped just under 500,000 cars last year.
“It took Tesla over a decade to reach a level that Rivian is supposed to double,” Trainer said.
The takeaway: The market is overflowing with liquidity following unprecedented stimulus from central banks and governments. This has helped market indices reach ever higher highs and produced a record year for initial public offerings as investors seek new places to park their money. But in the midst of all the euphoria, it’s important to keep an eye on the fundamentals.
Is this the biggest increase in consumer prices since 1990?
Consumer prices continue to rise, frustrating buyers and worrying policymakers charged with controlling inflation.
How big is the problem? New data released on Wednesday showed that over the past 12 months, prices rose 6.2%, the biggest increase since November 1990.
The high CPI reading could undermine the Federal Reserve’s insistence that the phenomenon is transient and will recede as the disturbances from the pandemic subside.
“Our fundamental view remains that the underlying imbalances of supply and demand, as president [Jerome] Powell said last week, largely settling down, leaving inflation close to the Fed’s target, “Goldman Sachs strategists said in a note to clients this week.” But it’s now clear that this process will take longer than initially expected, and the inflation overrun is likely to get worse before it improves. “
Stores could choose to pass these higher prices on to buyers so they don’t lose money.
The end of an era for an American business icon
The company said on Tuesday it would split into three separate state-owned companies, expanding its business in aviation, health and energy. Investors applauded the move, pushing its share up 2.7%.
At its peak in early 2001, GE shares were worth more than $ 500 billion, making it one of the most valued companies on the planet. But the 2008 financial crisis hit GE Capital hard, and the company made a disastrous bet on the fossil fuel industry as the world turned to renewable and cleaner energy solutions. GE had to sell assets to pay off its massive debt load.
What’s left of the business is only worth $ 122 billion.
The powerful conglomerate could recover. But for now, at least, it’s decidedly old-fashioned.
Also today: The U.S. Consumer Price Index arrives at 8:30 a.m. ET.
Coming tomorrow: Profits from Tapestry, Weibo, Yeti and Lordstown Motors.
– Chris Isidore contributed reporting.