R1T door panels on the trim line at Rivian’s assembly plant.
Courtesy Rivian
Trading in shares of electric vehicle start-up Rivian Automotive is starting to make no sense.
The stock was down 14% in early afternoon trading Monday on a weak day for the market. The S&P 500 and Dow Jones Industrial Average were off 1.8% and 1.2%, respectively.
It’s easy to see why shares of Rivian (ticker: RIVN) were falling. Early investors might be selling, and the market hasn’t been kind to start-ups in general lately. Still, Rivian’s steep drop is looking a bit fishy.
Now, this isn’t a call to rush in and buy. But the market looks like it is throwing out the baby with the bathwater. Take the relative electric-vehicle valuations.
Shares of a dozen EV start-ups that Barron’s tracks are trading at or near 52-week lows. A big reason: Many look like they need more capital.
Lordstown Motor (ticker: RIDE) is a prime example. On Monday, the company reported first-quarter earnings that were a little better than expected. Still, the stock fell—down almost 12% in midday trading. Shares hit a new 52-week low, at one point as low as $1.55 a share.
The weak market is responsible for part of Monday’ reaction, but investors are abandoning more speculative start-up stocks for other reasons—and the EV companies are in a particularly tight spot.
Lordstown, for instance, has 2.2 quarters of cash left on its books at the current quarterly cash-burn rate. That apparently spooked investors Monday.
The 2.2 ratio is at the low end: Lucid (LCID), Hyliion (HYLN), and Rivian (RIVN) have the most cash relatively speaking.
The most cash, on an absolute basis, belongs to Rivian. The company ended 2021 with more than $18 billion. The next best balance is Lucid with more than $5 billion.
Investors might be forgetting or simply dismissing just how much cash Rivian has. Rivian’s enterprise value, which is essentially market capitalization less net cash, is down to about $6 billion. Lucid’s enterprise value is about 25 billion. Both companies have plants and are shipping EVs. The disparity is a little jarring.
Whatever the case, arguing with the market isn’t usually a winning strategy. But Rivian shares have been battered in the market selloff and by investors wanting to get out of the way of the end of the company’s initial public offering lockup.
The prohibition on sales by early investors that typically accompanies any IPO wrapped up Monday. Investors selling ahead of the expiration have pushed shares down 37% over the past month. That compares with 14% decline for the Nasdaq Composite over the same period.
Still, relatively speaking, Rivian stock is in a unique spot.
At all their peaks, the dozen EV start-ups had a combined market capitalization of more than $430 billion. Now the combined cap sits at $85 billion, down 80%.
Outside of the three most valuable EV start-ups—Lucid, Rivian, and Polestar, which is merging with special purpose acquisition company Gores Guggenheim (GGPI)—the combined caps of the rest are down to $11 billion from a peak of $122 billion.
All the declines reflect a lot of things, including more competition from traditional players such as Ford Motor (F) and General Motors (GM) as well as dwindling cash balances.
Investors no longer seem to believe that all the EV start-ups that popped onto the scene in the past few years can be long-term winners anymore.
Write to Al Root at [email protected]
