Rivian pre-order customers made over $240 million in profit on IPO pop

Rivian electrical vans are seen parked close to the Nasdaq MarketSite constructing in Occasions Sq. on November 10, 2021 in New York Metropolis.

Michael M. Santiago | Getty Pictures

Rajiv Patel, an environmental guide in Austin, Texas, put down a $1,000 deposit on a Rivian electric SUV earlier this 12 months. He has no thought when he’ll get his automobile, known as the R1S, however his down cost is paying off in a really totally different method.

As a pre-order buyer, Patel was capable of purchase into Rivian’s IPO on Tuesday evening as a part of the corporate’s directed share program. He bought the utmost 175 shares for $13,650 on the $78 IPO worth. After the stock popped 29% on Thursday, Patel’s stake is now price $17,628.

“After I spend money on these firms, I am all the time a protracted maintain man,” mentioned Patel, 45, including that he invested in Tesla not lengthy after its 2010 IPO and likewise purchased shares in Lucid Motors, which went public in July. “I am undoubtedly not a meme inventory man. With these three, I be ok with the tech.”

The tech is all Patel can at present guess on. Following its Nasdaq debut on Wednesday, Rivian has a market cap of $86 billion, greater than Ford and about equal to General Motors, though the corporate is projecting income of between zero and $1 million for the third quarter.

Rivian reserved as much as 7% of the IPO shares for DSP individuals, as the corporate specified by its prospectus. Eligible buyers fell into two classes: Individuals who reserved both an R1S or an R1T electrical truck as of Sept. 30, and firm officers, administrators and their associates. The deposits are refundable.

This system follows comparable strikes by Airbnb, Uber and Doximity, which put aside shares of their choices for hosts, drivers and doctors, respectively. What units Rivian’s DSP aside is that the EV firm would not have precise prospects but, regardless of a backlog of 55,400 pre-orders, as of Oct. 31.

Assuming the DSP allotted all its accessible shares, individuals collectively invested about $835 million into Rivian’s inventory. As of Wednesday’s shut, these shares are price a complete of near $1.08 billion, representing a paper acquire of round $245 million.

Joshua White, a finance professor at Vanderbilt College, mentioned it is a fantastic deal for individuals who can take part as a result of scorching IPO shares nearly all the time take pleasure in a first-day pop, and retail buyers normally get shut out. DSP buyers may also promote instantly in the event that they select as a result of they don’t seem to be topic to a post-IPO lock-up interval.

“You sort of know stepping into that is going to be a fairly good sweetheart deal for purchasers who enroll,” mentioned White, who beforehand served as an economist for the Securities and Alternate Fee. “Not having a product, it is a method to prolong some goodwill upfront to allow them to lock in these returns immediately.”

Patel acquired his first e-mail about Rivian’s DSP final month and was advised he wanted to pre-register by Oct. 25. This system was being run by Morgan Stanley, the lead underwriter on the IPO.

After the inventory priced at $78 late Tuesday, Patel was in a position to enter his Morgan Stanley account and choose what number of shares he needed, as much as 175. He chosen the max and transferred the cash.

Patel mentioned that whereas he is an enormous fan of Tesla, the Rivian R1S will likely be his first electrical automobile, although he is undecided when it’ll arrive. Rivian mentioned it plans to ship its backlogged autos by the tip of 2023. Within the meantime, the corporate is growing supply autos for Amazon, which ordered 100,000 to be delivered by 2030, together with 10,000 as early as subsequent 12 months.

Patel, who has two children, is prepared to attend for the SUV, which has seven seats. Tesla’s Fashions X and Y seat 5.

“Having a household with two younger kids, an SUV is much more practical than the Y or X,” Patel mentioned. He additionally put down a refundable deposit on a Lucid automobile, “however I believe I am absolutely dedicated to Rivian at this level,” Patel mentioned.

As for his investments, he is principally targeted on clean-tech firms. Nevertheless, he admitted that he offered some Tesla shares final 12 months, lacking out on the 2021 rally.

“I had to purchase a home,” Patel mentioned. “However the housing market in Austin is nice, so no regrets there.”

WATCH: Rivian debuted on the Nadaq today

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