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Rivian is competition for Tesla's institutional investors: Hedge fund veteran

·Markets Reporter
·2 min read
In this article:
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"Rivian (RIVN) is the first legitimate competition Tesla (TSLA) has ever had in terms of institutional investor interest," says hedge fund veteran Nicholas Colas.

The co-founder of DataTrek Research explains the electric vehicle (EV) company, which just went public on Wednesday, is an option for investors, who saw only Tesla as a legitimate EV player.

"We’ve done enough IPOs over the years to know some investors cycle through new companies as they go public, selling the 'old' name and replacing it with the 'new,'" wrote Colas in a note to investors.

"Tesla has been the only 'real' EV play in US equity markets for years. Now it has competition for the marginal investor," he added.

"With TSLA still 2.1% of the S&P 500 (5th largest holding), it will be interesting to see how this all plays out," he wrote.

Rivian achieved a market cap of $86 billion on its first day of trading. Comparatively, that valuation is about the same as GM (GM), and slightly less than Ford's (F) $77 billion market cap.

Colas goes on to note Rivian's market cap is about 8% of Tesla's $1.1 billion current valuation.

"On the one hand, that seems reasonable," said Colas. "Rivian has great investor/partners in Amazon (AMZN) and Ford. We’ve seen its products firsthand, and they are truly compelling."

He goes on to note though Tesla did not reach a +$80 billion market cap until early 2020. By then, it was producing 100,000 vehicles a quarter. Colas highlights that Rivian is just starting to ship its first customer vehicles now. The company aims to make up to a 1 million vehicles a year by 2030.

"Rivian’s valuation makes it a legitimate option for institutional investors who have previously only had Tesla to play the electric vehicle space," wrote Colas.

Some industry watchers highlight the massive valuations for pure electric vehicle makers, versus traditional auto makers.

"With the success of Tesla and now Rivian, at least from the market perspective, one would think that GM and Volkswagen (VOW3.DE) and Nissan (7201.T) and other car giants were not hard at work on electric vehicles," Josh Wein, portfolio manager with Hennessy Funds told Yahoo Finance.

"I mean, the valuations that are ascribed to these electric vehicle-only makers is incredible and would indicate that they will absolutely dominate the space, which I can't imagine in 10 years will be the case," he added.

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