As the listing date for Amazon-backed electric vehicle company Rivian approaches, the target IPO price has accelerated up and up, and as it has done so, the number of major car manufacturers whose market cap could be surpassed has grown. Kia, Nissan…even Honda. That’s right, Honda who sell 5 million cars a year and generate $130bn in revenue could be overtaken by a company with virtually no revenue or manufacturing capability. The valuation will seem absurd so some, fully justified to others. Whichever camp you’re in, it does raise some fascinating questions around investors’ perception of some key value drivers…

• Captive market or single customer? Amazon is Rivian’s largest outside shareholder (c. 22%) and seemingly its largest customer (with a pre-order for 100k vehicles). A rare situation that brings huge opportunity – anyone can see the value in being well positioned to supply vehicles into a logistics behemoth like Amazon in the years ahead – but also a unique set of risks. There is understood to be an exclusivity arrangement preventing Rivian supplying other logistics companies – which restricts future sale volumes and raises questions around both conflicts of interest and key customer risk. Have these concerns failed to fully register? Or is the size of the prize of Amazon as a captive customer just so large that they are not deemed to matter?
• Market growth and market share: At the end of the day, long-term value will be driven by the long-term fundamentals – key amongst them, demand. Demand for electric vehicles is only going up. According to UBS, 20% of all vehicles sold globally will be electric by 2025, 40% by 2030 and close to 100% by 2040. But what’s equally important – and much harder to predict – is market share. There can be no doubt that the automotive industry will remain fiercely competitive on a global basis, as traditional manufacturers fully transition to electric and new players gain traction. Is there a temptation to make overly optimistic assumptions around the long-term market share of new players, due to a lead in the R&D race today?
• Timing: The timing of IPOs is a fascinatingly complex blend of strategy, opportunism, gaming and PR. Listing during the COP26 summit – when green-tech boosting pledges from governments and corporates alike are front of mind – makes a lot of sense. But to what extent should investors be wary of a ‘timing premium’ in the initial price?

It’ll be a fascinating ride to see how these dynamics play out in the IPO pricing, and on the road beyond…