Rivian, the Government Unicorn

The EV truck maker is worth $120.5 billion. It has sold 156 vehicles.

WSJ editorial.

"We live in the age of free money and endless government subsidy, which is the only way to explain the $100 billion public stock offering by Rivian this week. The electric truck maker has delivered a mere 156 vehicles, but investors are betting government won’t let it fail.

Twelve-year-old Rivian is being hailed as the next Tesla. Yet when Tesla went public in 2010 it reported $93 million in revenue and was valued at $1.7 billion. Rivian’s sales are almost all to its own employees and it projected at most $1 million in revenue in the third quarter. On Wednesday it nonetheless raised nearly $12 billion. Shares later surged as euphoric investors rushed in, and at $120.5 billion Rivian is the fifth largest auto maker in the world by market value. Ponder that one. 

General Motors recorded $122 billion in revenue and sold 6.8 million vehicles last year. Its market cap: $89 billion. CEO Mary Barra seems baffled by the market disparity. “General Motors is so undervalued as we start this wonderful period we’re in because we invested over three, four years ago in electric vehicles,” she said Wednesday at a New York Times forum.

You can understand why Ms. Barra would be miffed after all her lobbying for government EV subsidies. Now Rivian is eating her government lunch. Rivian’s valuation seems less a reflection of investors’ confidence in the company than in government policies to encourage and eventually force consumers to buy EVs. Even Rivian in its prospectus noted that “regulatory requirements and incentives” as well as future bans on the sales of internal combustion engines are a business “tailwind.” Are they ever. 

Take the Democrats’ $4 trillion spending bill, which includes a 30% business tax credit for EVs. The subsidy will benefit Amazon, which has ordered 100,000 Rivian vans. Consumers can also pocket a $7,500 tax credit for pickup trucks, vans and SUVs that cost as much as $80,000. An earlier draft had a price cap of $74,000 for pickups.

That would have covered Rivian’s higher-end $73,000 R1T pickup. But GM must have howled since its Hummer EV starts at $79,995. So now the cap is $80,000. Detroit auto makers also won an additional $4,500 bonus tax credit for EVs produced in unionized U.S. factories. Rivian’s factory in Normal, Ill., isn’t unionized—at least not yet.

Rivian’s nonunion shop hasn’t put off woke institutional investors. Investors also don’t seem troubled by Rivian’s forecast that it doesn’t expect to fulfill the 55,400 orders it has received for trucks and SUVs until the end of 2023.

Rivian also noted in its prospectus that it would be treated as an “emerging growth company” under the 2012 JOBS Act until it completed its IPO. That means the $100 billion “startup” didn’t have to comply with many Sarbanes-Oxley disclosure requirements or accounting standards. This too didn’t seem to trouble investors, not even after recent problems at other EV startups that have generated public investor euphoria.

This summer, less than a year after going public, Lordstown alerted investors that there was “substantial doubt regarding our ability to continue as a going concern.” It has since received a capital infusion by selling its factory in Lordstown, Ohio, to Foxconn for $230 million.

EV truck maker Workhorse Group this week disclosed it is under federal investigation by the Justice Department and Securities and Exchange Commission, apparently related to stock trading this year when there were rumors it would receive a U.S. Postal Service contract. It didn’t, and its stock has since plunged more than 80%.

Rivian may not encounter as many problems but it’s hard for investors to tell. And if it does, it could apply for an Energy Department loan guarantee.

This is an extraordinary moment. We are watching the government literally underwrite a new industry before our eyes, steering capital to EV makers come what may. In post-capitalist America, you can still become a billionaire overnight—if you’re in a business favored by politicians."