Tesla CEO Elon Musk on Rivian: Production and cashflow will be the 'real test'
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Tesla (TSLA) CEO Elon Musk says the real test for newly public electric vehicle startup Rivian (RIVN) will be high volume production and breakeven cashflow.
In a reply to a Twitter follower, Musk wrote:
"I hope they're able to achieve high production and breakeven cash flow."
He went on to say there have been hundreds of automotive startups, but "Tesla is [the] only American carmaker to reach volume production & positive cash flow in past 100 years."
Rivian went public this Wednesday reaching an $86 billion valuation right out of the gate as the company raised $12 billion in its IPO.
I hope they’re able to achieve high production & breakeven cash flow. That is the true test.
There have been hundreds of automotive startups, both electric & combustion, but Tesla is only American carmaker to reach high volume production & positive cash flow in past 100 years.— Elon Musk (@elonmusk) November 11, 2021
Tesla and Rivian command an 'innovation premium'
On Friday, Rivian shares were trading around $129 each. The Irvine, California-based electric vehicle (EV) startup topped a valuation of $110 billion dollars during Friday's session.
For perspective, Tesla didn't reach a $100 billion valuation until January of last year. The company has been around for about 18 years. Tesla posted its first back-to-back profit in the 4th quarter of 2018. Prior to that, some analysts had underestimated the company, pointing to its cash burn.
For years, Tesla was just about the only EV play for investors wanting to get into the space. Some now see Rivian as real competition when it comes to institutional investment interest.
"There's clearly an innovation premium where investors feel comfortable coming in and paying up for their favorite brands and their favorite ideas," Callie Cox, Ally Invest senior investment strategist told Yahoo Finance Live on Friday.
"I think we're in a renaissance for innovation right now with so many developments in tech and crypto at the moment," said Cox. "But I think Rivian is going to be a really important stress test for the markets and all these concept stocks that are taking in lots of money right now."
"It's going to be interesting to see how investor demand is around Rivian, especially in the months and maybe the year ahead," she added.
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