MELBOURNE (Reuters Breakingviews) - Just as Rivian Automotive makes the electric-vehicle market look racier, another risqué deal comes along. The Amazon.com-backed company on Tuesday priced its initial public offering at a $77 billion valuation despite only having just started selling its trucks. Even more revealing about the provocative state of the industry is the $1.4 billion sale of battery-powered-van maker Cenntro – to a lingerie merchant ir.nakedbrands.com.
It’s essentially a special-purpose acquisition company transaction. Buyer Naked Brand, which peddles intimate apparel and swimwear under the Frederick’s of Hollywood label, is a shadow of its former self. It trades at 67 cents a share, down from $800 or so in early 2018 before its bricks-and-mortar business floundered. The Nasdaq-listed company recently offloaded much of its U.S. and New Zealand operations and has not reported earnings for over a year. It did, however, become a favourite of the Reddit retail-investing crowd earlier this year, enabling it to raise $150 million.
Naked is sitting on $270 million in net cash. And Chief Executive Justin Davis-Rice has been open about hunting for a takeover target. He said in August it would probably involve a switch from online retail to clean technology.
The flattering growth curves Cenntro is modelling would make plenty of shell-company deals blush. It values the enterprise at 80% of 2023 revenue, lower than most publicly traded electric-vehicle startups, with troubled Lordstown an exception. The projections are based on boss Peter Wang anticipating a 629% compound growth rate that will take this year’s 1,563 vehicle sales and $25 million of revenue to 75,000 and $2.1 billion within two years.
That will require a lot of legwork. At present Cenntro only sells small, almost golfcart-like vehicles. Just one of the six outsourced manufacturing plants it wants to use is in operation. And it will face heavy competition for larger designs: Ford Motor already has pre-sold at least 25,000 of its e-Transit vans.
The buyer’s cash should come in handy, though, and Wang is likely to stay in the driver’s seat with Davis-Rice seeming content to ride shotgun as a director. Only in such an overheated market, though, could there be even a hint of logic to such naked ambition.
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- Rivian Automotive on Nov. 9 priced its initial public offering at $78 a share, valuing the electric-truck maker at $77 billion. The offering will raise more than $10 billion
- Lingerie and swimwear maker Naked Brand on Nov. 8 said it had agreed to buy Cenntro Automotive, a privately held maker of electric-powered commercial vehicles. The all-stock deal values the combined company’s enterprise at just under $1.7 billion, based on information provided in a presentation.
- Cenntro’s investors would own 70% of the new company and Naked Brand’s the rest. The two companies expect to have to raise $50 million in cash to complete the transaction.
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