- In a much-touted deal, Amazon ordered 100,000 electric delivery vans from Rivian in 2019.
- Amazon doesn’t have to buy any of the vans, equity research firm New Constructs noted in a report.
- And Rivian can’t sell vans to anyone else for four years, which could give its competitors a leg up.
When Amazon announced in 2019 that it was ordering 100,000 electric delivery vans from the startup Rivian, it was a landmark for the EV-maker. That one of the world’s most powerful companies would bet on a startup over Ford or General Motors looked like a major endorsement.
The deal has the potential to be a launching pad for Rivian by providing it with a steady stream of revenue as it ramps up a consumer vehicle business that started deliveries in September. But, according to the equity-research firm New Constructs, the Amazon order isn’t as favorable as it appears at first glance.
In a research report arguing that investors should stay away from Rivian’s IPO, which is scheduled for next week, the firm cited the Amazon deal as a reason why the startup could be overvalued.
“Despite the popularity of the electric vehicle market and huge gains in Tesla’s stock (TSLA), we think investors should avoid the temptation to buy Rivian shares,” New Constructs wrote.
In the report, New Constructs highlighted the ways in which Amazon’s deal with Rivian is tilted in favor of the tech giant: Amazon doesn’t have to buy any vans from Rivian, Rivian isn’t allowed to sell the vans to anyone else for four years, and, for two years after that period ends, Rivian can sell a van to another company only if Amazon doesn’t want it.
(If Amazon ends its agreement with Rivian before buying 100,000 vans, or if Rivian ends the agreement because Amazon didn’t order enough vans in a two-year period, Amazon has to reimburse some of the money Rivian spent developing them, and Rivian can sell the vans to other companies.)
If the deal stays in place, Rivian won’t be able to build relationships with other customers as quickly as rivals like GM, Ford, and Canoo might.
“The exclusivity clause of this agreement may significantly hamper Rivian’s ability to capture market share,” New Constructs wrote, while other competitors enter the electric delivery van market. Ford is rolling out an electric version of its popular Transit van, and GM has shown off a new battery-powered van.
Rivian did not respond to a request for comment.
The company’s IPO could make it the most valuable startup in a crowded field of EV startups. It’s seeking a share price of between $57 and $62, which would give it a market capitalization of around $50 billion.
New Constructs wrote that it would be difficult for Rivian to justify a valuation in that range, given its lack of experience and the competition it faces from more established automakers. Even if Rivian quickly becomes profitable and grows sales at a pace similar to what Tesla experienced in the years after releasing its debut model, it would only be worth around $13 billion today, New Constructs wrote.
“We are skeptical that Rivian’s IPO will deliver for investors,” the firm wrote. “Investors shouldn’t buy a stock just because it’s in a hot sector.”
Are you a current or former Rivian employee? Do you have a news tip or opinion you’d like to share? Contact this reporter at mmatousek@insider.com, on Signal at 646-768-4712, or via his encrypted email address mmatousek@protonmail.com.
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