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Rivian does not make a profit

Rivian does not make a profit

| November 23, 2021
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To paraphrase the famous line from the Humphrey Bogart movie “The Treasure of the Sierra Madre”, recent IPOs seem to be saying “Profits?  We don’t need no stinkin’ profits!”  Rivian Automotive, a maker of electric “adventure vehicles” based in Irvine California recently went public with an eye-watering first-day valuation of $105 billion.  This is a higher valuation than both Ford, whose valuation is $78 billion, and GM at $90 billion.  There’s just one slight problem - Rivian does not make a profit.  In fact, according to Professor Jay Ritter at the University of Florida’s Warrington College of Business, in the last year only about 20% of IPO’s were by companies that actually made money.  This is a complete reversal since the 80’s, when 80% of IPOs were profitable.  And it is reminiscent of 2000, when a similarly tiny percentage of IPOs were profitable - right before the dot.com crash.  (Data: Professor Ritter, Chart: chartr.co)

Jeffrey Cerny

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