Rivian Stock Is Just About Free. Investors Shouldn’t Forget Cash.

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Rivian Automotive shares are basically free, the latest evidence, if any was needed, that the stock market is hard to figure out.

Shares of the electric- truck start-up (ticker: RIVN) fell for a fourth consecutive day on Tuesday. First there was the banking crisis, which hit most stocks last week. Then the market learned Monday that Rivian might end its exclusivity pact with

Amazon.com

(AMZN), freeing up the auto maker to sell electric vans to other customers.

That hit the stock even though having access to more customers could be considered a positive.

On Tuesday,

Morgan Stanley

analyst Adam Jonas said inefficiencies at Rivian are weighing on profit margins, according to a report from Bloomberg. Morgan Stanley didn’t immediately respond to a request for Jonas’s report.

He rates Rivian shares at Buy and has a target of $28 for the price.

Rivian closed down 3.8% at $13.21. The

S&P 500
and

Nasdaq Composite
rose 1.7% and 2.1%, respectively.

That is an interesting price given the amount of stock Rivian has issued. The company ended 2022 with about $12 billion in cash on its balance sheet, or $13.03 a share. So net of cash, Rivian stock is at 19 cents.

That is a theoretical calculation. Rivian doesn’t generate positive free cash flow and it is spending to grow its business.

Still,

Lucid

(LCID) stock is trading at roughly $7 a share net of cash. That makes

Lucid

‘s enterprise value, which is essentially the market capitalization plus debt, minus cash, roughly $13 billion. Rivian’s is close to zero even though Rivian is actually larger than Lucid, selling more vehicles and generating more sales.

Rivian is expected to deliver about 50,000 vehicles in 2023, which could bring in $4.1 billion in sales. Lucid is expected to deliver about 12,000 vehicles for a total of $1.3 billion.

It’s tough to explain the valuation difference between the two EV start-ups. “That’s a good question,” said Battle Road Research analyst Ben Rose when asked to explain it.

He offered a couple of potential reasons, but said neither is convincing.

First, while the market might have more confidence in Lucid’s market position, Rose has doubts about whether Lucid can achieve the production it has forecast for 2023. What is more, he said, demand for trucks, Rivian’s focus, is bigger than for the high-end luxury sedans Lucid makes.

Second, Rose says, Saudi investment funds, which own the majority of Lucid, could bail out the business if it runs into trouble. But any injection of cash would likely require the company to issue stock in exchange, diluting the value of shareholders’ existing holdings.

Rose rates Rivian shares at Hold. He doesn’t have a target for the price.

Investors can’t access Rivian’s cash, but the situation is still odd. How it will work out is anyone’s guess.

Write to Al Root at [email protected]