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Rivian Doesn’t Need Cash Like Many Other EV Start-Ups. Why the Stock Is Tanking.

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Door panels at Rivian’s assembly plant.

Courtesy Rivian

Trading in shares of electric vehicle start-up


Rivian Automotive

is starting to make no sense.

The stock was down almost 20% Monday afternoon on a weak day for the market. The

S&P 500
and

Dow Jones Industrial Average
were off 2.7% and 1.6%, respectively.

It’s easy to see part of the reason why shares of


Rivian

(ticker: RIVN) were falling. Early investors might be selling, and the market hasn’t been kind to start-ups in general lately. Still, Rivian’s steep drop is looking a bit fishy.

Now, this isn’t a call to rush in and buy. But the market looks like it is throwing out the baby with the bathwater. Take the relative electric-vehicle valuations.

Shares of a dozen EV start-ups that Barron’s tracks are trading at or near 52-week lows. A big reason is that many look like they need more capital.


Lordstown Motor

(ticker: RIDE) is a prime example. On Monday, the company reported first-quarter earnings that were a little better than expected. Still, the stock fell, for a loss of almost 12% in midday trading. Shares hit a new 52-week low, going as low as $1.55 a share at one point.

The weak market is responsible for part of Monday’ reaction, but investors are abandoning more speculative start-up stocks for other reasons—and the EV companies are in a particularly tight spot.

Lordstown, for instance, has 2.2 quarters of cash left on its books at the current quarterly cash-burn rate. That apparently spooked investors Monday.

One reason Lordstown needs more capital is that sales didn’t come in as fast as expected. The company’s initial projections called for $1.7 billion in 2022 sales. The actual sales figure is likely to be about $25 million, according to Wall Street estimates.

The 2.2 ratio is at the low end:


Lucid

(LCID),


Hyliion

(HYLN), and Rivian (RIVN) have the most cash relatively speaking.

The most cash, on an absolute basis, belongs to Rivian. The company ended 2021 with more than $18 billion. The company with the next-best balance is Lucid, with more than $5 billion.

Investors might be forgetting or simply dismissing just how much cash Rivian has. Rivian’s enterprise value, which is essentially market capitalization less net cash, is down to about $6 billion. Lucid’s enterprise value is about 25 billion. Both companies have plants and are shipping EVs. The disparity is a little jarring.

Whatever the case, arguing with the market isn’t usually a winning strategy. But Rivian shares have been battered in the market selloff and by investors wanting to get out of the way of the end of the company’s initial public offering lockup.

The prohibition on sales by early investors that typically accompanies any IPO wrapped up Monday. Coming into Monday trading, investors selling ahead of the expiration had pushed shares down more than 25% over the past month. That compares with an 11% decline for the

Nasdaq Composite
over the same period.

Still, relatively speaking, Rivian stock is in a unique spot.

At their peaks, the dozen EV start-ups had a combined market capitalization of more than $430 billion. Now the combined cap sits at $85 billion, down 80%.

Outside of the three most valuable EV start-ups—Lucid, Rivian, and Polestar, which is merging with special-purpose acquisition company


Gores Guggenheim

(GGPI)—the combined caps of the rest are down to $11 billion from a peak of $122 billion.

All the declines reflect a lot of things, including more competition from traditional players such as


Ford Motor

(F) and


General Motors

(GM) as well as dwindling cash balances.

Investors no longer seem to believe that all the EV start-ups that popped onto the scene in the past few years can be long-term winners anymore.

Write to Al Root at allen.root@dowjones.com

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