On January 10, The Wall Street Journal reported that several long-tenured top executives, including the heads of car body engineering and supply chain, recently left electric vehicle (EV) start-up Rivian Automotive, Inc. (NASDAQ: RIVN). The departures are curious as Rivian seems poised to increase production significantly in 2023, which in turn should cause cash flow to improve from very negative levels in 2022.
A risk for Rivian: after leaders at two other well-known EV start-ups, Lucid Group, Inc. (NASDAQ: LCID) and Lordstown Motors Corp. (NASDAQ: RIDE) departed, their share prices plummeted 52% and 90%, respectively, since the dates the departures were reported.
SELECTED START-UP ELECTRIC VEHICLE STOCK PRICE PERFORMANCE
| (Share prices in U.S. dollars) | Date of News Report | Share Price When News Was Reported | Current Share Price | % Decline Since Departure News |
| Rivian | ||||
| Announces departure of long-tenured employees | January 10, 2023 | $16.45 | $16.45 | — |
| Lucid Group | ||||
| Media reports departure of six high-level executives | September 7, 2022 | $15.08 | $7.19 | -52% |
| Lordstown Motors | ||||
| CEO and CFO depart | June 14, 2021 | $10.65 | $1.04 | -90% |
Of course, these declines do not necessarily mean that Rivian shares will follow the same path. It must be noted that Lordstown’s news took place before the NASDAQ began its major collapse in November 2021, so part of its sharp declines were likely due to a weak stock market. Furthermore, Lordstown was never as financially strong as Rivian, and the departures were more high level — its CEO and CFO.
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Lucid, on the other hand, could be a closer comparison. The level of its executive departures — the two most senior were the head of global manufacturing and the head of its Arizona operations — seems fairly similar to those just announced by Rivian.
In early January, Rivian reported modestly disappointing 4Q 2022 production results: the company manufactured 10,020 vehicles in the just-complete quarter and delivered 8,054 of them. This brings its full-year 2022 production quantity to 24,337, less than its 25,000-unit goal, and full-year 2022 deliveries to 20,332. (As an aside, this giant gap between cars manufactured and delivered is difficult to explain.)
READ: What Does Tesla’s Plunge Mean For Lucid And Rivian?
More positively, demand for Rivian’s EVs does not seem to be in question. Reservations for Rivian’s pickup trucks and SUVs have increased since mid-year 2022, reaching about 114,000 as of November 7, 2022. Preorders totaled around 98,000 on June 30, 2022.
Investors’ primary concern is Rivian’s enormous cash burn rate. It burned about US$1.6 billion per quarter in the first three quarters of 2022. Coincidentally, Lucid also posted huge operating cash losses in the first nine months of 2022.
Determining the appropriate valuation for Rivian has been a challenge since its IPO fourteen months ago. Factoring in its giant cash holdings (US$13.3 billion as September 30, 2022), the company’s enterprise value has fallen to about US$3 billion. Still, that is difficult to square with a projected US$5.45 billion adjusted EBITDA loss in the full-year 2022.
Rivian Automotive, Inc. last traded at US$16.94 on the NASDAQ.
Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
