Rivian electrical vans are seen parked close to the Nasdaq MarketSite constructing in Times Square on November 10, 2021 in New York City.
Michael M. Santiago | Getty Images
Rajiv Patel, an environmental marketing consultant in Austin, Texas, put down a $1,000 deposit on a Rivian electrical SUV earlier this 12 months. He has no thought when he’ll get his automobile, known as the R1S, however his down fee is paying off in a really completely different method.
As a pre-order buyer, Patel was in a position to purchase into Rivian’s IPO on Tuesday evening as a part of the corporate’s directed share program. He bought the utmost 175 shares for $13,650 on the $78 IPO value. After the inventory popped 29% on Wednesday, Patel’s stake is now value $17,628.
“When I put money into these corporations, I’m all the time a protracted maintain man,” mentioned Patel, 45, including that he invested in Tesla not lengthy after its 2010 IPO and likewise purchased shares in Lucid Motors, which went public in July. “I’m positively not a meme inventory man. With these three, I be ok with the tech.”
The tech is all Patel can presently wager on. Following its Nasdaq debut on Wednesday, Rivian has a market cap of $86 billion, greater than Ford and about equal to General Motors, regardless that the corporate is projecting income of between zero and $1 million for the third quarter.
Rivian reserved as much as 7% of the IPO shares for DSP contributors, as the corporate specified by its prospectus. Eligible buyers fell into two classes: People who reserved both an R1S or an R1T electrical truck as of Sept. 30, and firm officers, administrators and their associates. The deposits are refundable.
The program follows comparable strikes by Airbnb, Uber and Doximity, which put aside shares of their choices for hosts, drivers and docs, respectively. What units Rivian’s DSP aside is that the EV firm would not have precise clients but, regardless of a backlog of 55,400 pre-orders, as of Oct. 31.
Assuming the DSP allotted all its obtainable shares, contributors collectively invested about $835 million into Rivian’s inventory. As of Wednesday’s shut, these shares are value a complete of near $1.08 billion, representing a paper achieve of round $245 million.
Joshua White, a finance professor at Vanderbilt University, mentioned it is an amazing deal for individuals who can take part as a result of sizzling IPO shares nearly all the time take pleasure in a first-day pop, and retail buyers often get shut out. DSP buyers also can promote instantly in the event that they select as a result of they are not topic to a post-IPO lock-up interval.
“You form of know moving into that is going to be a reasonably good sweetheart deal for purchasers who join,” mentioned White, who beforehand served as an economist for the Securities and Exchange Commission. “Not having a product, it is a approach to prolong some goodwill upfront to allow them to lock in these returns straight away.”
Patel obtained his first electronic mail about Rivian’s DSP final month and was advised he wanted to pre-register by Oct. 25. The program was being run by Morgan Stanley, the lead underwriter on the IPO.
After the inventory priced at $78 late Tuesday, Patel was ready to enter his Morgan Stanley account and choose what number of shares he needed, as much as 175. He chosen the max and transferred the cash.
Read extra about electrical automobiles from CNBC Pro
Patel mentioned that whereas he is an enormous fan of Tesla, the Rivian R1S can be his first electrical automobile, although he is undecided when it is going to arrive. Rivian mentioned it plans to ship its backlogged automobiles by the top of 2023. In the meantime, the corporate is growing supply automobiles for Amazon, which ordered 100,000 to be delivered by 2030, together with 10,000 as early as subsequent 12 months.
Patel, who has two youngsters, is keen to attend for the Rivian SUV.
“Having a household with two younger youngsters, an SUV is much more purposeful than the Y or X,” Patel mentioned, referring to Tesla’s automobiles. He additionally put down a refundable deposit on a Lucid automobile, “however I believe I’m totally dedicated to Rivian at this level,” Patel mentioned.
As for his investments, he is largely centered on clean-tech corporations. However, he admitted that he bought some Tesla shares final 12 months, lacking out on the 2021 rally.
“I had to purchase a home,” Patel mentioned. “But the housing market in Austin is nice, so no regrets there.”
Correction: A previous model of this story had an incorrect determine for the variety of seats in Tesla’s automobiles. The quantity has been eliminated.