Rivian Stock is practically free. Investors should not forget about cash.

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Rivian ended 2022 with about $12 billion on its balance sheet.

Justin Sullivan/Getty Images

Rivian Automotive stock is basically free, the latest evidence, if any, was needed that the stock market is hard to calculate.

Shares of the electric vehicle startup (ticker: RIVN) fell for the fourth day in a row on Tuesday. First there was the banking crisis, which hit most stocks last week. Then on Monday, the market learned that Rivian could end its exclusivity deal with

Amazon.com

(AMZN), which allowed the automaker to sell electric vans to other buyers.

This hurt the stock, although access to more customers can be considered a positive.

On Tuesday,

Morgan Stanley

According to a Bloomberg report, analyst Adam Jonas said Rivian’s inefficiencies are weighing on earnings. Morgan Stanley did not immediately respond to a request for a Jonas report.

He rates Rivian stock at a Buy level and sets a target of $28.

Rivian closed down 3.8% to $13.21.


S&P 500

And


NASDAQ Composite

increased by 1.7% and 2.1% respectively.

This is an interesting price given the amount of Rivian shares outstanding. The company ended 2022 with about $12 billion in cash, or $13.03 per share. So, net of cash, Rivian shares are worth 19 cents.

This is a theoretical calculation. Rivian does not generate positive free cash flow and spends money on growing its business.

Still,

It’s clear

(LCID) trade at approximately $7 per share less cash. What is he doing

It’s clear

The value of the enterprise, which is essentially market capitalization plus debt minus cash, is approximately $13 billion. Rivian is close to zero even though Rivian is actually bigger than Lucid, selling more cars and generating more sales.

Rivian is expected to deliver around 50,000 vehicles in 2023, which could generate $4.1 billion in revenue. Lucid is expected to deliver approximately 12,000 vehicles for a total of $1.3 billion.

It is difficult to explain the difference in valuation of the two electric vehicle startups. “That’s a good question,” said Battle Road Research analyst Ben Rose when asked to explain.

He offered several possible reasons, but said none were convincing.

First, while the market may have more confidence in Lucid’s market position, Rose doubts whether Lucid will be able to meet its 2023 production guidance. Lucid makes luxury sedans.

Second, says Rose, Saudi investment funds, which own most of Lucid, can help the business if it gets into trouble. But any injection of cash would likely require the company to issue shares in return, which dilutes the value of shareholders’ existing assets.

Rose rates Rivian shares as a Hold. It has no price target.

Investors can’t access Rivian’s cash, but the situation is still strange. How this will turn out, one can only guess.

Email Al Root at [email protected]

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