Have to wonder why a very well funded company would plan to IPO before they've delivered a single product. Almost like they are betting against themselves.
It’s Other People’s Money making the bet. The worst that happens is Rivian fails and post-IPO equity investors lose everything. Founders, early investors, others getting liquid took money off the table (presumably).
You’re not losing or betting against yourself if you got liquid and someone else is holding the bags.
current investors get a markup, leadership cashes out. if they can do it and market is frothy, derisks and may be years/never they could do it again, esp at these levels
It seems in this space actually delivering something takes out the magic and reduces valuation. Remember Magic Leap? Much better to push vaporware and cash out.
Only if you don't understand the constraints on battery and battery supply chain. The reason Ford is not actually planning to build as many as people assume.
I fear it's going to be like 90's Russian hyperinflation (ending with default). Ain't gonna be pretty if that happens, for anyone in the US or abroad. There's also nothing the Fed can do about it once it starts in earnest.
Are we? I mean, where else are excess savings going to go? It's clear that every time stocks start to seriously pull back that the Fed just pumps out more money. At some point it seems like yes, stocks are overvalued, but I'd rather put money into something with productive capacity, as opposed to something like cash which more and more seems like it will just lose value faster.
"Excess savings" are going to panic and go to "the mattress" at some point, when it becomes clear "excess savings" are invested into a de-facto Ponzi scheme which has no bearing on the real world at all. See e.g. 2008 or 2001 before that.
I mean, that's my exact point. If there is anything 2001 or 2008 taught the world, it's that the Fed will run the printing press full bore if there is a big downturn, so putting cash in your mattress is the absolute worst place for it to be.
It already did run it full bore for the past year and a half - US public is just not paying attention. At some point running it full bore will turn the US into Zimbabwe, currency-value wise. That will not reflect positively on the economy as a whole.
They have been buying up corporate bonds, which is not the same as printing money and spending it. They simply have to slow down and eventually stop buying bonds and as they are paid back, that money goes back of the ledger. I.e. it's destroyed.
The best way to make money now is by borrowing a ton of money long term and investing it into property. Doesn't even matter what kind. Source: every single Russian oligarch, who borrowed eye watering amounts of money just before hyperinflation hit, and returned kopecks on the ruble.
Not OP but.. There’s a difference between debts and assets though. Is the $160B debt equivalent to $160B in assets or did they screw up and overspend? If I bought a $500k for $1M then the next buyer can’t get it appraised for such
The amount owed to the creditors doesn’t change in that scenario. The screw up (assuming the market recognizes it) would destroy value for the equity holders.
Another way to think about total enterprise value is that there are two groups of people who have a claim on the business: the equity holders and the creditors. In order to own the business free and clear, you need to buy both of their claims. The total equity claim is the market cap and the total creditor claim is the outstanding debt.
Parent is referring to total enterprise value, which is the right way to compare the value of businesses with different amounts of leverage.
Imagine if you bought a restaurant for $100 cash, and I bought an identical restaurant with $50 cash and $50 of debt against the business. Both restaurants are worth $100.
Why would this company IPO now instead of waiting to have actual customers with products in their hand? I can only speculate that investors are forcing their hand so they can cash out as soon as possible, because they don’t believe in the company’s long term performance. Will retail investors be left holding overpriced equity?
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[ 4.1 ms ] story [ 84.9 ms ] threadYou’re not losing or betting against yourself if you got liquid and someone else is holding the bags.
"So that makes tesla worth $8 tril by these metrics."
https://twitter.com/GerberKawasaki/status/143129811631815884...
Some valuations are truly difficult to grasp.
https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
You can also calculated their book value, which is their assets minus their liabilities, but that is smaller than their market cap (as it should be).
Another way to think about total enterprise value is that there are two groups of people who have a claim on the business: the equity holders and the creditors. In order to own the business free and clear, you need to buy both of their claims. The total equity claim is the market cap and the total creditor claim is the outstanding debt.
Imagine if you bought a restaurant for $100 cash, and I bought an identical restaurant with $50 cash and $50 of debt against the business. Both restaurants are worth $100.
"Don’t want to be unreasonable, but maybe they should be required to deliver at least one vehicle per billion dollars of valuation before the IPO?"
https://twitter.com/elonmusk/status/1431522886456651778