Table of Contents
It’s great that automakers don’t need revenue anymore, Tesla is being sued by JPMorgan, and Audi is set to further consider partnering with McLaren. All that and more in The Morning Shift for November 16, 2021.
1st Gear: Rivian Has No Significant Revenue But Is Also Worth Billions
We have been here before, specifically with the startup Nikola, which was also worth billions with no revenue last summer. The difference with Rivian seems to be that people actually believe it can deliver, unlike Nikola. (Rivian started customer vehicle production in September, but a quick scan of the Rivian forums shows people being told there will be delays on their orders.) Whether Rivian can or not will still be an open question until it actually does; still, Rivian is on the right trajectory.
Bloomberg took stock Friday:
Add another milestone to Rivian Automotive Inc.’s blistering and surprising run as a new stock: It’s now the biggest U.S. company by market value with no revenue.
Rivian’s shares have soared 67% from their initial public offering price of $78 on Wednesday. It’s just about a 25% gain away from overtaking Volkswagen AG, one of the world’s largest car producers, in market value. Meanwhile, Lucid has seen its stock price advance 339% this year. It went public via a merger with a blank-check company in July.
“(It’s) seriously mind boggling when it hasn’t even earned any discernible revenue yet,” said Michael Hewson, chief market analyst at CMC Markets, discussing Rivian’s valuation.
Rivian’s rally for the third straight day vaulted its market value above Mercedes-Benz maker Daimler AG on Friday, after racing past Ford and General Motors Co.’s market valuations in the previous two days.
Since then, Rivian’s stock has edged even higher. Meanwhile, the Atlanta Journal-Constitution reported Monday that Rivian is in talks to build a second manufacturing site outside of Atlanta, flush with money as Rivian is.
Electric truck and SUV maker Rivian Automotive is in late-stage discussions to open a vehicle manufacturing and battery plant east of Atlanta along Interstate 20, according to people with knowledge of the deal. The people stressed to The Atlanta Journal-Constitution that the negotiations aren’t final yet, and details could change.
Irvine, California-based Rivian said Monday it “is in discussions with multiple locations as part of a competitive process for siting a second manufacturing facility.”
“This may include Rivian being involved in certain public facing processes at potential locations. Involvement in these processes does not indicate a final decision,” the company added in a statement.
The Rivian project likely would be one of the biggest economic development deals in Georgia in a decade, with the potential to bring thousands of jobs while cementing the state as a powerhouse in the electric vehicle industry. The state of Georgia has aggressively recruited Rivian for months in an effort to grow its automotive sector.
All things, for now, are coming up Rivian.
2nd Gear: Rivian Became The Biggest By Topping Lucid
Lucid issued its first earnings statement Monday as a public company, having gone public earlier this year. The picture, for now, is pretty, though, like Rivian, it sure is worth a lot of money on paper without significant revenue to speak of.
EV maker Lucid Group Inc. strengthened its balance sheet to $4.8 billion cash in the third quarter and used its debut earnings statement to affirm its guidance to produce 20,000 vehicles next year.
Newark, Calif.,-based Lucid said Monday that reservations for its debut EV have surpassed 17,000 after hitting 13,000 in the quarter ended Sept. 30. That represents an order book of more than $1.3 billion, the company said. While Lucid said it is “confident” of hitting its production goal for next year, the automaker acknowledged risks from ongoing disruptions to global supply chains, which it is taking steps to mitigate.
Lucid shares rose 4 percent in late trading in New York. As of Monday’s close, the stock was up 85 percent since listing on July 26 via a reverse merger with a blank-check company, a deal which raised more than $4 billion. It is one of several electric-vehicle upstarts to choose this path to public markets.
As of Monday’s close, the company has a market capitalization of about $73 billion, despite generating only meager revenue.
Like Rivian, people seem to believe that Lucid will pan out, though it must be said that 20,000 cars is a drop in the bucket compared to the big boys. There is so much money riding on hope.
(As an aside, here is one Rivian forum poster trying to assuage the worries of a delayed Rivian buyer by telling them about the experiences of a delayed Lucid buyer.)
3rd Gear: JPMorgan Sues Tesla
This is, sort of incredibly, another repercussion of a tweet from Tesla CEO Elon Musk, the one which got him in trouble with the Securities and Exchange Commission. You remember the one, about funding being secured and taking Tesla private.
Anyway, it’s a bit convoluted, but JPMorgan says in a lawsuit that Tesla owes it millions, in part because of a series of events related to the tweet.
According to the complaint filed in Manhattan federal court, Tesla in 2014 sold warrants to JPMorgan that would pay off if their “strike price” were below Tesla’s share price upon the warrants’ expiration in June and July 2021.
JPMorgan, which said it had authority to adjust the strike price, said it substantially reduced the strike price after Musk’s Aug. 7, 2018 tweet that he might take Tesla private at $420 per share and had “funding secured,” and reversed some of the reduction when Musk abandoned the idea 17 days later.
But Tesla’s share price rose approximately 10-fold by the time the warrants expired, and JPMorgan said this required Tesla under its contract to deliver shares of its stock or cash. The bank said Tesla’s failure to do that amounted to a default.
“Though JPMorgan’s adjustments were appropriate and contractually required,” the complaint said, “Tesla has flagrantly ignored its clear contractual obligation to pay JPMorgan in full.”
Tesla did not immediately respond to requests for comment after market hours.
This is the kind of lawsuit that I imagine lawyers love, as they get paid either way.
4th Gear: BMW Sees Green
Despite the pandemic and chip shortage, automakers have still been making a lot of money in recent months, and BMW is no exception. Its chief financial officer recently sat down with reporters to discuss the numbers, and the numbers are good.
BMW’s (BMWG.DE) October sales came in better than expected and November sales are off to a good start, the carmaker’s CFO said on Tuesday, adding he expected the company to reach the upper end of its 9.5% to 10.5% automotive profit forecast this year.
“I would be disappointed if we failed to reach the upper end of our current margin target,” [Chief Financial Officer Nicolas Peter] said.
The company expects electric vehicle sales to at least double in 2022 and plans increase the prices for all its new cars by an average of 1%, the CFO said.
He added BMW had already secured battery cell supply until 2025 and is negotiating with manufacturers about contracts for the second half of the decade.
The pandemic and chip shortage has been a real lesson in how automakers make as much money as they do, which increasingly is not about volume, but profit per vehicle.
5th Gear: Audi And McLaren, Part Deux
Yesterday, we learned that McLaren didn’t sell to Audi, though it did seem like *something* was in the works, possibly involving BMW, too. Today, Reuters has a few more details; this all seems to be about Audi’s burning desire to get in on Formula 1, along with Porsche. Both Audi and Porsche, of course, are owned by Volkswagen.
Audi’s supervisory board will discuss on Wednesday ways for the company to enter Formula One, including via possible partnership with McLaren Automotive, two sources told Reuters on Tuesday, adding no decision has yet been made.
The board of Volkswagen (VOWG_p.DE), which owns Audi, discussed the matter of getting a foot into the Formula One market at a meeting last week, said two sources who declined to be named.
Audi CEO Markus Duesmann and Porsche CEO Oliver Blume were known as “ardent fans of Formula One”, one source said.
A spokesperson for Audi told Reuters it was “looking at various cooperation ideas” but did not confirm whether it was discussing a possible sale with McLaren.
A move like this would be going against Volkswagen’s moves in recent times to slowly back away from the supercar business, so I’m not really sure what this is about. Also, Audi is historically associated with rallying and Le Mans, not F1, but maybe it wants to flip that script. (Editor’s note: Regretfully, as a racing history pedant I am morally obligated to point to Auto Union’s status as a consistent grand prix contender in the Nazi-funded era before WWII, fighting Mercedes through the mid 1930s.)
Reverse: Eliška Junková Born
Alžběta “Eliška” Junková was born on this day in 1900 in the Austro-Hungarian town Olomouc, today part of the Czech Republic. She took an interest in racing cars early on in high school, alongside her then-boyfriend and eventual husband Vincenc “Čeněk” Junek.” With her passion ignited, she took driving lessons in Prague and became one of the first women in the newly-formed Czechoslovakia to receive a driver’s license. When her husband kicked off his career as a car racer, Junková sat beside him as his racing mechanic and co-pilot. However, it wasn’t long before she took the wheel herself.
Eliška Junková rose to fame racing her trademark Bugatti across Europe’s most difficult courses. She even developed a close personal friendship with the car’s maker, Ettore Bugatti. Junková was not only technically adept, she also earned a reputation as one of the first drivers to do walk-through’s of courses like Italy’s famous Targa Florio prior to races in order to commit landmarks and turns to memory.
Junková retired from racing in 1928, but her legacy was immortalized by Czech composer, Jaroslav Ježek’s, classic jazz composition “Bugatti Step,” as well as by Junková’s personal autobiography, “My Memory is Bugatti.”
My autobiography will also be titled “My Memory is Bugatti.”
Neutral: How Are You?
I’m taking my car to get its required annual state inspection this weekend, a ritual which I used to hate but now quite appreciate, probably because, these days, I’m not broke and if something needs fixed it’s not the end of the world. Also, if something needs fixed, it needs fixed, especially since I’m driving to California in a few weeks.