Al Root

Rivian Automotive stock has been performing much worse than the majority of its rivals. The issue isn't one of sales or products. That is spent. The organization needs a strategy for cash management and improving investor sentiment. Wall Street has some words of wisdom.

In a study released on Wednesday, Morgan Stanley analyst Adam Jonas noted that current Rivian (ticker: RIVN) stock levels were trading below their cash value. Rivian completed the year with around $13 in cash per share and gained an additional $1.40 in cash per share by selling bonds.

DJ | Rivian Stock Is Doing Poorly. Wall Street believes the time has come for an activist.



The cash-per-share computation is purely theoretical and does not take into account any debt. Investors are unable to obtain funds, and Rivian is using more funds than it generates. Jonas feels that the strange scenario is the result of his expenditures.

Rivian spent over $3.7 billion on operational expenditures in 2022, which was approximately $2.8 billion more than Tesla (TSLA) spent when it was a similar size nearly ten years earlier.

Investors are depreciating cash utilization over years rather than quarters, according to Jonas. He recently polled investors on what Rivian should do, and over 40% thought Rivian should seek some form of "strategic alternative."

The study did not identify strategic alternatives, which might include everything from new investors to management changes to a drastic adjustment in expenditure plans.

Wedbush analyst Dan Ives feels that an activist would be beneficial to Rivian. According to him, the activist might assist with budgets, concentration, and strategic planning. "If you look at Salesforce and other names, activism is the fuel on the fire."

For months, activists such as Dan Loeb's Third Point, Elliott Investment Management, 

Starboard Value, Inclusive Capital, and ValueAct Capital Partners have been investing in Salesforce (CRM).

Salesforce CEO Marc Benioff stated that ValueAct's skills "heavily affected" the company's recent quarterly performance, 

saying that ValueAct's CEO Mason Morfit brought "full decks of strategy for distribution strategy, pricing strategy, and product strategy" with him.

Investors are pleased that Benioff is seeking outside counsel. This year, Salesforce stock has increased by more than 40%. That's the type of stock movement that a shift in investor attitude may cause.

There are various methods for influencing investor mood. In a study released Tuesday, Battle Road Research analysts Ben Rose and Jonathan Rowe outlined a six-point recovery strategy for Rivian. The first step in the strategy is for management to purchase some Rivian shares. Insider purchasing might show outside investors that management is optimistic about the future and that a company is a good deal at present levels.

Battle Road is "confused" that no management or board members are purchasing, and "rather, the business continues to issue new shares to management, 

despite the stock's terrible performance." Rivian's stock-based compensation expense in 2022 will be about $1 billion.

In addition to stock purchases, Battle Road wants Rivian to relocate its headquarters to Illinois, where its manufacturing plant is located, increase manufacturing and fulfillment staffing levels, halt spending on a second assembly plant in Georgia, renegotiate supplier deals, and accelerate production of electric delivery vans.

All of these are solid suggestions that an activist investor may recommend.

Battle Road shares are valued. Rivian stock is a hold with no price goal. Ives and Jonas rate stocks. Buy. Jonas has a $26 price objective on the company, while Ives has a $25 price target.

Rivian shares fell 0.3% to $13.7 per share. The S& P 500 and Nasdaq Composite were both marginally higher. Rivian stock was down nearly 26% in 2023 as of Wednesday's trade. The stock is fallen more than 80% from the company's IPO price of $78 in 2021.

With all of the reductions, Rivian is now selling at around 0.7 times its expected 2023 revenues. Lucid (LCID) is worth over ten times its expected revenues. Tesla is worth around six times its current market value.