Rivian pre-order prospects revamped $240 million in revenue on IPO pop

Rajiv Patel, an environmental guide in Austin, Texas, put down a $1,000 deposit on a Rivian electrical SUV earlier this 12 months. He has no concept when he’ll get his car, known as the R1S, however his down cost is paying off in a really completely different method.

As a pre-order buyer, Patel was in a position to purchase into Rivian’s IPO on Tuesday night time as a part of the corporate’s directed share program. He bought the utmost 175 shares for $13,650 on the $78 IPO worth. After the inventory popped 29% on Wednesday, Patel’s stake is now value $17,628.

“After I spend money on these corporations, I am all the time a protracted maintain man,” mentioned Patel, 45, including that he invested in Tesla not lengthy after its 2010 IPO and likewise purchased shares in Lucid Motors, which went public in July. “I am undoubtedly not a meme inventory man. With these three, I be ok with the tech.”

The tech is all Patel can presently wager on. Following its Nasdaq debut on Wednesday, Rivian has a market cap of $86 billion, increased than Ford and about equal to Basic Motors, though the corporate is projecting income of between zero and $1 million for the third quarter.

Rivian reserved as much as 7% of the IPO shares for DSP contributors, as the corporate specified by its prospectus. Eligible buyers fell into two classes: Individuals who reserved both an R1S or an R1T electrical truck as of Sept. 30, and firm officers, administrators and their associates. The deposits are refundable.

This system follows comparable strikes by Airbnb, Uber and Doximity, which put aside shares of their choices for hosts, drivers and medical doctors, respectively. What units Rivian’s DSP aside is that the EV firm does not have precise prospects but, regardless of a backlog of 55,400 pre-orders, as of Oct. 31.

Assuming the DSP allotted all its accessible shares, contributors collectively invested about $835 million into Rivian’s inventory. As of Wednesday’s shut, these shares are value a complete of near $1.08 billion, representing a paper acquire of round $245 million.

Joshua White, a finance professor at Vanderbilt College, mentioned it is an excellent deal for individuals who can take part as a result of scorching IPO shares virtually all the time take pleasure in a first-day pop, and retail buyers often get shut out. DSP buyers may also promote instantly in the event that they select as a result of they are not topic to a post-IPO lock-up interval.

“You form of know entering into that is going to be a fairly good sweetheart deal for purchasers who enroll,” mentioned White, who beforehand served as an economist for the Securities and Change Fee. “Not having a product, it is a technique to lengthen some goodwill upfront to allow them to lock in these returns instantly.”

Patel acquired his first e mail about Rivian’s DSP final month and was advised he wanted to pre-register by Oct. 25. This system was being run by Morgan Stanley, the lead underwriter on the IPO.

After the inventory priced at $78 late Tuesday, Patel was ready to enter his Morgan Stanley account and choose what number of shares he needed, as much as 175. He chosen the max and transferred the cash.

Patel mentioned that whereas he is a giant fan of Tesla, the Rivian R1S might be his first electrical car, although he is unsure when it is going to arrive. Rivian mentioned it plans to ship its backlogged autos by the top of 2023. Within the meantime, the corporate is creating supply autos for Amazon, which ordered 100,000 to be delivered by 2030, together with 10,000 as early as subsequent 12 months.

Patel, who has two youngsters, is prepared to attend for the Rivian SUV.

“Having a household with two younger kids, an SUV is much more practical than the Y or X,” Patel mentioned, referring to Tesla’s autos. He additionally put down a refundable deposit on a Lucid car, “however I believe I am totally dedicated to Rivian at this level,” Patel mentioned.

As for his investments, he is largely targeted on clean-tech corporations. Nevertheless, he admitted that he offered some Tesla shares final 12 months, lacking out on the 2021 rally.

“I had to purchase a home,” Patel mentioned. “However the housing market in Austin is nice, so no regrets there.”

Correction: A previous model of this story had an incorrect determine for the variety of seats in Tesla’s autos. The quantity has been eliminated.