Rivian’s pre-order customers made over $ 240 million in profit on pop IPO


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Rivian electric trucks are parked near the Nasdaq MarketSite building in Times Square on November 10, 2021 in New York City.

Michael M. Santiago | Getty Images

Rajiv Patel, an environmental consultant in Austin, Texas, deposited a $ 1,000 deposit on a Rivian electric SUV earlier this year. He has no idea when he will receive his vehicle, called the R1S, but his down payment pays off in a very different way.

As a pre-order client, Patel was able to participate in Rivian’s IPO on Tuesday night as part of the company’s directed equity program. He bought the maximum of 175 shares for $ 13,650 at the IPO price of $ 78. After the stock climbed 29% on Wednesday, Patel’s stake is now worth $ 17,628.

“When I invest in these companies I’m always a longtime guy,” said Patel, 45, adding that he invested in Tesla shortly after its IPO in 2010 and also bought shares. by Lucid Motors, which went public in July. “I’m definitely not a meme stock guy. With these three, I feel good about the tech.”

Technology is all Patel can bet on right now. After his Nasdaq debut on Wednesday, Rivian has a market cap of $ 86 billion, higher than Ford and roughly equal to General Motors, even though the company is forecasting revenues of between $ zero and $ 1 million for the third. trimester.

Rivian has reserved up to 7% of the IPO shares for DSP participants, as the company reported in its prospectus. Eligible investors fell into two categories: people who booked an R1S or R1T electric truck on September 30, and officers, directors and their affiliates. Deposits are refundable.

The program follows similar initiatives by Airbnb, Uber and Doximity, which reserve shares of their offerings for hosts, Conductors and doctors, respectively. What sets Rivian’s DSP apart is that the electric vehicle company does not yet have any actual customers, despite a backlog of 55,400 pre-orders as of October 31.

Assuming the DSP allocated all of its available shares, the participants collectively invested around $ 835 million in Rivian shares. As of Wednesday’s close, those shares are worth a total of nearly $ 1.08 billion, which is a paper gain of about $ 245 million.

Joshua White, a finance professor at Vanderbilt University, said it was a good deal for those who can participate, as hot IPO stocks almost always enjoy a pop on day one, and retail investors are generally left out. DSP investors can also sell immediately if they wish, as they are not subject to a post-IPO lock-in period.

“You kind of know this is going to be a really good deal for clients who sign up,” said White, who was previously an economist for the Securities and Exchange Commission. “Not having a product is a way to spread some goodwill up front so they can lock in those returns right away.”

Patel received his first email regarding Rivian’s DSP last month and was told he had to pre-register by October 25. The program was managed by Morgan Stanley, the main underwriter of the IPO.

After the stock was listed at $ 78 on Tuesday night, Patel was able to access his Morgan Stanley account and select the number of stocks he wanted, up to 175. He selected the maximum and transferred the money. .

Learn more about electric vehicles from CNBC Pro

Patel said that although he is a huge Tesla fan, the Rivian R1S will be his first electric vehicle, although he does not know when it will arrive. Rivian said he plans to deliver his overdue vehicles by the end of 2023. In the meantime, the company is developing delivery vehicles for Amazon, which has ordered 100,000 to be delivered by 2030, including 10,000 from next year.

Patel, who has two children, is ready to wait for the Rivian SUV.

“Having a family with two young children, an SUV is much more functional than the Y or the X,” Patel said, referring to Tesla vehicles. He also posted a refundable bond on a Lucid vehicle, “but I think I’m fully committed to Rivian at this point,” Patel said.

As for its investments, it focuses mainly on clean technology companies. However, he admitted to selling Tesla shares last year, missing the 2021 rally.

“I had to buy a house,” Patel said. “But the housing market in Austin is great, so no regrets there.”

Correction: An earlier version of this story had an incorrect number for the number of seats in Tesla vehicles. The number has been deleted.

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