Electric vehicle startup Rivian, buoyed by financing from heavyweight backers like Amazon and Ford as well as other investors for its cutting-edge EV technology and impressive debut offering, is charting a more orthodox path with a traditional initial public offering (IPO), shunning the now-fashionable Special Purpose Acquisition Company (SPAC) shortcut favored by its peers.
Decoding SPAC vs. IPO
A SPAC is essentially a blank check company established solely to pool funds through an IPO with the intention of acquiring an existing company. This approach often foregoes the exhaustive regulatory filings and rigid formalities, with the capital assembled held in trust until an acquisition target is found or after the lapse of a set time frame.
Joining forces with a SPAC offers benefits like reduced expenses and an expedited IPO process. Without the burden of past financial performance and with the prerogative to forecast future profits, it presents an attractive proposition.
Conversely, an IPO demands extensive documentation and compliance, entailing a comprehensive scrutiny into the company’s potential as a worthy investment.
Rivian seeks to take the markets by storm with an IPO that may value the company north of $70 billion.
Amid a backdrop of robust capital support, SPACs scour the marketplace for nascent startups, aiming to nab the next colossal success story akin to Tesla or Amazon, or to uncover burgeoning unicorns (privately held startups valued at over $1 billion). However, concerns loom as many of these young companies may not be sufficiently mature to withstand the pressures and transparency of a traditional public offering.
Rivian’s counterparts like European EV innovator Polestar have embraced the SPAC pathway, stepping into the public domain with a hefty $20 billion price tag through a merger with SPAC conglomerate Gores Guggenheim Inc. This valuation even eclipses that of Lucid, backed by Saudi investment and valued at $12 billion through its deal with Churchill IV.
Despite the allure, not all SPAC mergers have avoided the spotlight of skepticism concerning their lofty valuations. As an illustrative case, Nikola corporealized as a public entity via a SPAC in early 2020 and confronted allegations of overvaluation and deceptive practices from its founder, alongside warnings from SEC about SPACs potentially misleading investors.
Similarly, Lordstown Motors, after merging with a SPAC, has witnessed a significant slump from its initial trading spike and remains under the investigative lens of the DOJ regarding its vehicular preorder activities prior to the deal.
Last year witnessed a surge in SPAC engagements, with records indicating $83.4 billion raised across 248 public launches as per SPAC Research. An additional 170 SPAC IPOs have garnered $54.7 billion to date, with the clock ticking for these entities to secure acquisition deals within their two-year inception deadline.
The Ascent of Rivian’s IPO
Striving for a valuation exceeding $70 billion, Rivian’s eagerly anticipated IPO is on the horizon. The EV trailblazer corralled a $2.5 billion investment spearheaded by T Rowe Price, augmenting its already impressive funding arsenal to over $10 billion, inclusive of a $1.3 billion contribution in December led by T. Rowe Price, joined by Amazon, Ford, and BlackRock.
Benefitting from a focused $440 million investment directly from Amazon’s Climate fund, Rivian anticipates substantial initial sales from Amazon’s hefty 100,000 electric delivery van order.
Financial disclosures unveil that Rivian incurred losses of $1.02 billion in 2020 and another $994 million within the first half of 2021 during the ramp-up for their flagship R1T electric pickup and R1S electric SUV launches.
While an official IPO date remains under wraps, industry murmurs suggest a debut might occur as early as mid-November 2021.
