The hottest IPO of 2021 has already cooled off

Two months after institutional investors and day traders piled money into Rivian, causing its stock price to more than double within a week of its Nasdaq debut, the California-based automaker is just about back where it started. Rivian’s shares settled at about $85 as of early afternoon Tuesday, slightly above its $78 per share initial offering and far below the $172 peak in mid-November.

The drop isn’t wholly unexpected. Some analysts watched with bewilderment as Rivian, which boasts barely any revenue and limited manufacturing scale, became the hottest IPO of 2021. They noted that the notoriously fickle meme stock brigade was particularly taken by the suddenly trendy upstart, while establishment investors hoped to get in early on “the next Tesla.”

For Rivian, however, the challenges go well beyond waning popularity.

In the past few weeks, Rivian faced some internal speed bumps. Its CEO, RJ Scaringe, warned that the company would fall short of its 1,200-truck production target for 2021. Then, The Wall Street Journal reported Monday that Rivian produced only about 1,000 vehicles last year. The Journal also broke news that the company’s chief operating officer retired in December, though Rivian officials said the departure had been planned well in advance.  

Rivian’s top benefactor, Amazon, also rocked the boat last week when it announced plans to become the first commercial customer of the Ram ProMaster electric vans from Stellantis (née Fiat Chrysler). Amazon still expects to purchase up to 100,000 Rivian-made delivery trucks by 2025, a deal that will make up the vast majority of Rivian’s revenue over the next few years, but the Stellantis arrangement spooked investors and sent Rivian’s stock tumbling.

Perhaps more concerningly, the legacy automotive industry’s shift toward electronic and autonomous vehicles is quickly gaining steam, putting upstarts like Rivian in a tough spot.

Over the past two months alone, several automakers have announced more ambitious targets for electric vehicle production, including Toyota, Nissan, and Volkswagen. Even Ferrari is blasting full-speed-ahead toward an EV future, embodied by its new, tech-centric leadership team announced Monday.

In addition, a Reuters report last week from the annual CES tech expo in Las Vegas showed how automakers are increasingly pairing off with semiconductor manufacturing partners to speed up their development of electric and self-driving fleets.

Rivian, by contrast, is essentially starting from scratch. The company operates just one plant, located in central Illinois, with plans to add a second in Georgia by 2024. Rivian also announced in October that it intends to make its batteries in-house, spurning its current supplier, Samsung SDI.

The fast-changing landscape means that Rivian’s existential business conundrum—how to outwit rival automakers that boast extensive experience, capital, and industry ties—is coming into view even faster.

Analysts remain a bit bullish on Rivian, with a consensus 12-month target price of about $135 per share, per TipRanks. But judging by its rollicking stock price, the days of Rivian’s white-hot IPO are done.

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Jacob Carpenter

NEWSWORTHY

Biding their time? Leaders of the U.S.’ top federal cybersecurity agency said they have not yet seen significant, successful hacks stemming from a major open-source vulnerability that became widely known last month, ZDNet reported Monday. However, hackers may have  accessed networks of companies, government agencies, and other organizations through the vulnerability, commonly known as Log4j or Log4Shell, and be lying in wait to attack, U.S. Cybersecurity and Infrastructure Security Agency Director Jen Easterly said. Easterly added that “we do expect Log4Shell to be used in intrusions well into the future,” noting that the theft of about 146 million records from Equifax in 2017 became public several months after hackers accessed the company’s servers. 

The App Store is hopping. Data released Monday by Apple indicated that developers made about $60 billion from sales through the company’s App Store in 2021, topping last year’s record haul, TechCrunch reported. While Apple did not release precise developer revenues, the company announced that developers have now earned $260 billion since the App Store debuted, up from the $200 billion figure disclosed in 2020. The declaration comes as Apple faces increasing pressure from developers, spurred in part by an ongoing lawsuit filed by Epic Games, to reduce the fees they pay on revenue generated through App Store Sales. Currently, Apple takes a 15% to 30% commission on App Store and in-app purchases.

A Meta mandate. Employees of Facebook and Instagram parent company Meta must receive a COVID-19 booster vaccine before they can return to their offices in late March, company officials announced and Bloomberg reported Monday. While many tech companies issued vaccine mandates in 2021 that required one or two shots, few have instituted requirements for booster shots to date. Meta staffers can ask to continue working from home by seeking a vaccine exemption that lasts for up to five months or by asking to stay remote permanently.

A bit of humility from Moxie. The CEO of encrypted messaging app Signal announced his resignation Monday after nearly a decade leading the company, The Financial Times reported. Moxie Marlinspike, an early proponent of open-source privacy technology, said in a blog post that he feels “very comfortable replacing myself as CEO,” adding that “it is an important step for expanding on Signal’s success.” WhatsApp co-founder Brian Acton, who sold his company to Facebook in 2014 and became an ardent critic of the social media giant’s privacy practices, will serve as interim CEO.

FOOD FOR THOUGHT

Are smart guns finally here? In a can’t-come-soon-enough development, two firearm manufacturers are close to reaching commercial viability with so-called smart guns—weapons equipped with fingerprint technology and other features designed to limit who can pull a trigger—after years of false starts, Reuters reported Monday. Pennsylvania-based LodeStar Works previewed its 9mm smart gun to investors last week, while Kansas-based SmartGunz disclosed that some law enforcement agencies are testing its product (it didn’t say who or how many). Some Second Amendment advocates have fought the development of smart guns, fearful that lawmakers will try to outlaw traditional firearms if the technology becomes widely available.

From the article:

LodeStar co-founder Gareth Glaser said he was inspired after hearing one too many stories about children shot while playing with an unattended gun. Smart guns could stop such tragedies by using technology to authenticate a user's identity and disable the gun should anyone else try to fire it.

They could also reduce suicides, render lost or stolen guns useless, and offer safety for police officers and jail guards who fear gun grabs.

But attempts to develop smart guns have stalled: Smith & Wesson got hit with a boycott, a German company's product was hacked, and a New Jersey law aimed at promoting smart guns has raised the wrath of defenders of the Second Amendment.

IN CASE YOU MISSED IT

Carsharing site Turo becomes first major IPO filing for 2022 following a record year for new stock issues, by Christiaan Hetzner

Democrats will (probably) miss their chance to shape crypto regulation, by Tor Constantino

China’s digital yuan will be the currency of choice at the Beijing Winter Olympics, despite calls for athletes to avoid it, by Eamon Barrett

Bitcoin’s plunge below $40K marks a sobering milestone: It now trails the Nasdaq over four years, by Shawn Tully

This CFO is betting on Bitcoin ‘Bividends’, by Sheryl Estrada

Trump says ban from Twitter ‘damaged the integrity’ of U.S. elections, by Erik Larson and Bloomberg

BEFORE YOU GO

A word about Wordle. Look, I like Wordle as much as the next 1.8 million guys and gals. The daily online word game is entertaining enough, even if I find it a bit simple (the New York Times’ Spelling Bee is where it’s at). I get that we all need some common activity to bond over. But can we please stop with tweeting our Wordle scores? My feed has too many gray and green and yellow boxes. I don’t need to know that you beat it in three tries at 4:30 a.m. And while we’re at it, enough with the spoof tweets using said boxes to make a middle finger or spell out various profanities. Let’s just enjoy the game in P-E-A-C-E.