North America IPO: Rivian Automotive’s US$13.7bn IPO

IFR Awards 2021
3 min read
Anthony Hughes

Electrifying debut

Amazon-backed Rivian Automotive priced the biggest US IPO in seven years and broke the curse of poor debuts from jumbo offerings as electric vehicle mania swept capital markets in 2021.

With pretensions to become the next Tesla and having already established a strong investor base by raising more money privately than nearly any other company, Rivian’s US$13.7bn Nasdaq IPO which priced on November 9 was theoretically a no-brainer.

Yet the company’s large market cap at IPO of nearly US$70bn, its lack of revenue ahead of a potentially risky ramp-up of production and a poorly performing new issue market at the time meant it wasn’t straightforward.

Not leaving anything to chance, the syndicate of bookrunners led by Morgan Stanley, Goldman Sachs and JP Morgan tied up US$5bn of cornerstone demand from a high-powered group of investors, including existing shareholders Amazon and T Rowe Price.

“Rivian had significant market cap for a company without revenue and was asking for a lot of capital at a time when the IPO market was fatigued,” said Colin Stewart, head of Morgan Stanley's tech capital markets business globally, describing the cornerstones as a “beacon” for investors.

Some early questions from the buyside focused on the pros and cons of having Amazon as a major customer, the e-commerce giant having previously agreed to buy 100,000 of Rivian’s delivery vans. Rivian plans to make electric SUVs, pickups and delivery trucks.

Yet Amazon’s large shareholding (17% post-IPO) and board representation eased concerns it would get the better end of the deal.

Rivian, founded in 2009 by MIT engineering graduate and CEO RJ Scaringe, went the extra mile in their investor education efforts. For those unable to visit the company’s massive new plant in Illinois, Rivian offered investors a “driver experience” in Brooklyn and Boston.

“That was nice even in a world where the roadshow has gone digital,” Stewart said.

The IPO was also a measure of how much had changed in the IPO market in the 11 years since Tesla went public in an offering that raised just US$226m at US$17. Tesla’s market cap surpassed US$1trn in the past year, but only after a decade of ups and downs and almost annual stock sales.

Rivian opted for a hybrid auction rather than a traditional bookbuild to take orders and get a better handle on demand before setting the price. Reflecting heavy oversubscription, the IPO priced US$4 above the US$72–$74 marketing range, which was revised up from US$57–$62 at launch. On debut, the shares jumped 29.1% to US$100.73.

Demand was strong enough to justify upsizing to 153m shares from 135m at launch, plus a fully exercised 15% greenshoe, enabling Rivian to emerge with more than US$19bn of cash to fund its massive ambitions. How quickly it can deliver on those plans will be crucial in supporting its deflated share price, which had fallen below US$84 by mid-January.

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