Electric-vehicle deals get racier than ever

MELBOURNE (Reuters Breakingviews) - Just as Rivian Automotive makes the electric-vehicle market look racier, another risqué deal comes along. The 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

Blue, white and red brassieres, the colours of the French national flag, hang from a balcony in Marseille, France, November 27, 2015 as the French President called on all French citizens to hang the tricolour national flag from their windows on Friday to pay tribute to the victims of the Paris attacks during a national day of homage. REUTERS/Jean-Paul Pelissier

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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