Well before electric-vehicle manufacturer Rivian became the hottest IPO of 2021, with a market valuation topping $100 billion despite no immediate revenue stream, Amazon pulled the modestly-known upstart into the mainstream—and, for better or worse, the automaker’s fate is now closely tied to the Seattle e-commerce behemoth.
Back in 2019, when Tesla remained the only major player in the EV market, Amazon made a big bet that Rivian could help deliver on its goals for reducing environmental emissions. Amazon led a $700 million investment round and placed an order of 100,000 electric vans for Prime delivery drivers, putting their stamp of approval on the Michigan-based company. With Amazon on board, more big names invested: Ford, T. Rowe Price, Cox Automotive.
The vote of confidence from Amazon, which owns a 20% stake in Rivian, likely helped drive the manufacturer’s stellar IPO on Wednesday, helping it become the second-most valuable automaker behind Tesla.
But recent disclosures have shown just how much Rivian has hitched its wagon to Amazon—with potential potholes looming down the road.
In an early October S-1 filing, Rivian detailed that “a significant portion” of its near-term revenue is expected to come from Amazon’s van order, warning that the business could be materially and adversely impacted if the relationship sours. While there’s no reason at this point to anticipate acrimony—Bezos issued a glowing tweet last month calling Rivian’s team “world class” and its CEO “one of the great entrepreneurs I’ve ever met”—Amazon appears to have plenty of wiggle room in its 100,000-van deal.
Notably, the S-1 filing specifies that Amazon is not required to buy a minimum number of vans, and the online retailer can buy similar vehicles from other vendors. The deal also comes with certain exclusivity terms favorable to Amazon, including first access to Rivian vehicles and an apparent four-year window when Rivian can only sell its delivery vans to Amazon. (Recent advertisements by Rivian pitching its commercial fleet to other customers have raised questions about whether the deal truly is as exclusive as the filing suggested, TechCrunch reported Monday.)
If all goes according to plan, the partnership could be a massive boost to Rivian, rocketing it into a leader in the nascent EV space. Informed investors paid little mind to the potential drawbacks of the arrangement Wednesday, as the stock closed above $100 a share, higher than its IPO price of $78 per share. Rivian’s stock jumped another 20% Thursday in midday trading, hitting $120 a share around noon.
“Amazon—which has plenty of incentive to help Rivian succeed with its 20% stake in the company—and all kinds of other businesses that need vans will see Rivian as the go-to provider,” Bloomberg columnist Conor Sen wrote Wednesday evening. “With Rivian unlikely to be able to meet market demand for years, it will have billions of dollars in annual revenue with an order backlog that stretches into the back half of the 2020s.”
But for a company so closely tied to Amazon, maintaining the marriage beyond a banner IPO could determine whether Rivian speeds ahead of the competition or stalls out.
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Jacob Carpenter
NEWSWORTHY
Elon’s stock selloff marches on. Regulatory filings Wednesday showed Tesla CEO Elon Musk sold $5 billion worth of stock in his electric-vehicle manufacturer, bringing him closer to meeting his not-exactly-legally-binding pledge to shed 10% of his shares in the company. The selloff follows Musk’s tweet last weekend promising to abide by the results of a poll asking the masses whether he should sell a fraction of his stake (the masses said “yes”). However, skeptics have noted that Musk faced a looming deadline to exercise stock options and a hefty tax bill. Tesla’s stock price has dropped 13% this week headed into Thursday, in part due to concerns about Musk’s declining shares. Musk has only sold about 3% of his stake this week.
Uber fee draws DOJ squeeze. The U.S. Justice Department said Wednesday that it is suing Uber Technologies for failing to provide wait-time fee exemptions to customers with physical disabilities. Federal prosecutors alleged Uber’s policy violated the Americans with Disabilities Act by discriminating against certain individuals who might need more than two minutes to get into a vehicle, the point at which the wait-time fee kicks in. In a statement, Uber officials said the policy was not intended for people with disabilities, adding that the company was in “active discussions with the DOJ about how to address any concerns or confusion before this surprising and disappointing lawsuit.”
Put the phone down, already. Instagram has started testing a new feature, called “Take A Break,” that gives users the option to receive a notification when they have spent a certain amount of time on the app. Instagram head Adam Mosseri, in a video posted online Wednesday, said the move is “part of a broader effort to try and give people more control over their experience of Instagram.” Of course, it also follows disclosures by Facebook whistleblower Frances Haugen, whose leaks included internal reports showing Instagram overuse hurt the mental health of some high-volume users, particularly teenagers.
YouTube tries to disband “dislike mobs.” YouTubers will no longer get to see how many people disliked a video on the platform following a change by the Google platform aimed at reducing harassment, Axios reports. The move, which has been tested by YouTube for several months, follows complaints that large groups of ill-intentioned individuals would coordinate to smash the dislike button on certain videos. Users can still hit the dislike button, which will inform YouTube’s algorithms and viewers’ recommended videos.
FOOD FOR THOUGHT
Is the curtain coming down on streaming growth? It’s looking like, at least in the U.S., streaming services might be approaching a saturation point. If you want Netflix, you probably already have it, no matter how many Squid Games or Queen’s Gambits the company creates. To wit: Several of Hollywood’s top streamers are reporting far more modest subscriber gains this year, the Financial Times reports. That trend came into even sharper focus when Disney reported disappointing Disney+ subscription numbers Wednesday, sending its stock price tumbling 7% as of noon midday trading on Thursday.
From the article:
So far this year, Netflix has added only 88,000 subscribers in the U.S. and Canada, compared with 6 million in 2020 and 3 million in 2019.
With 74 million subscribers in the U.S. and Canada, Netflix may be content with simply maintaining that base. But newer competitors need to add subscribers to make their heavy investments worth it.
Disney added only 2 million subscribers to its flagship streaming service globally in the third quarter, it reported on Wednesday, a sharp slowdown from the 12 million, 9 million, and 21 million signed up in the previous three quarters. Shares tumbled more than 4% on the results.
WarnerMedia’s HBO Max reported a similar slowdown in the quarter, signing up 570,000 Americans, down from 2.4 million and 2.8 million in the previous two quarters.
IN CASE YOU MISSED IT
Rivian CEO’s stake in electric car maker is worth $1.2 billion after IPO, by Scott Carpenter and Bloomberg
Rivian buyers don’t have their cars yet, but a tidy profit from the IPO may have consoled them, by Christian Hetzner
As investors flock to Rivian, GM says it ‘won’t cede leadership position to anyone’, by Christian Hetzner
Muslims can’t trade crypto, says the head of Sharia compliance in the world’s largest Islamic country, by Sophie Mellor
How companies from FedEx to Intel are getting their A.I. projects to the finish line, by Anne Sraders
Chipmakers are demanding steep price hikes—and that means more inflation on shelves and the car lot, by Christian Hetzner
You can scrutinize Big Tech, but don’t punish it for succeeding, by Don Rosenberg
Don’t make Elon Musk’s expensive stock options tax mistake, by Vieje Piauwasdy
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BEFORE YOU GO
Pick a name, literally any other name. Amazon is undoubtedly one of the world’s great business success stories, with countless victories and ingenious ideas. Calling a streaming service “IMDb TV” is not one of them. The home of Judge Judy and Mad Men reruns is saddled with a nondescript, uninspired bore of an acronymic name. Until now! Or, at least, until Amazon comes up with something better. The Information reports that the IMDb TV moniker is mercifully not long for this world. No definitive word yet on what will take its place, though here’s hoping the studio folks come up with something better than Zon (an idea that, thankfully, has already been nixed).
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