Rivian (NASDAQ:RIVN) stock cannot find its footing, and keeps setting lower-lows. This has left original investors with a lot of pain from the IPO day. The relief to those “bag-holders” will not likely come for years if at all. However, this doesn’t mean that RIVN stock is not worth investing in because the company is appealing. Even auto experts like Ford (NYSE:F) lost money with it.

Before we discuss investing in Rivian stock we must first label it as a speculative bet. This isn’t because we doubt that the company can succeed. But because there are no financial statistics to support many claims and accomplishments. Such is the life of a start up company, especially one entering the electric vehicle (EV) market.

The internal combustion engine (ICE) market is huge. The world still produces around 100 million ICE machines per year. Recently, auto makers have declared that a change is coming. EVs are the emerging vehicles looking to take over the baton from fossil fuels. Of course there will be challenges, mainly the battery technology. But meanwhile, we have enough to make the EV addressable market practically unlimited.

RIVN stock should do well in that setting, because the opinions on main street are favorable. Just yesterday a family member of mine knows someone who bought a Rivian truck and immediately flipped it for a $30,000 premium. In addition to highlighting the U.S. inflation problem, it also says that demand won’t be a problem. If they build the trucks, the buyers will come.

RIVN Stock Is Down With the Rest

The honeymoon period after the IPO was too extreme. Investors loved it too much, which set the stage for the exact opposite reaction. The problem was that the whole equity market soured about the same time. This was especially true for startups in the EV sector. Most other high profile names are under $5 per share. Consider Hyliion (NYSE:HYLN), Workhorse (NASDAQ:WKHS) and Lordstown (NASDAQ:RIDE) to name three. RIVN and Lucid (NASDAQ:LCID) will eventually make it. But it won’t be another rocket ship ride for their stocks like before.

I lieu of the paragraph where I usually discuss the company financials, we will talk hype. The expectations are high because of the commercials we’ve seen. The Rivian trucks are striking, and they pack some cool features. There’s on my street now, and it grabs attention. While it is not for me, I can see the attraction and the potential it will have. I doubt that they will have problems selling them.

This puts capacity as the primary potential hiccup. Judging by the spending now, management is not holding back. Last year, Rivian had -$2.4 billion in cash from operations. This is a potential problem if the Federal Reserve gets its way with crimping cash in the U.S. Borrowing may become more difficult, and this could present a problem for the company when it tries to execute on its plans.

Supply May Be the Bigger Problem

We’ve already suggested that demand is not likely a potential hurdle, but supply already is. Start up efforts already are difficult, and it is near impossible when there are external problems. The pandemic shut downs have created a global back log in many industries. One main concern is the chip shortage, which is hitting the auto manufacturers hard. This is industry-wide, nevertheless RIVN stock is likely to suffer from it for a while.

They can’t sell what they don’t have. And buyers will not wait too long because consumer spending in on fire. The longer this drags on, the shorter the early mover advantage becomes. The legacy manufacturers have resources to catch up and surpass new comers like Rivian. Luckily, they have Amazon (NASDAQ:AMZN) as a part owner. Amazon might be able to empower them if they need help down the line.

Invest in RIVN Stock With Extreme Caution

I am confident that the company will make it in the end. They will probably sell out of their inventory as fast as they can produce it. But investors need to separate the tech from the financial prowess. Currently Wall Street has no proof of any success there yet. That’s the disadvantage that startups have. What is making it worse is the horrible overall investor sentiment. The CBOE Volatility Index (INDEXCBOE:VIX) has been too high for too long. As such, all stocks are under pressure.

I wrote about this risk in February and noted the need for caution when the stock was almost three times higher. I reiterate my concerns here that the downside risk is real. However, the absolute level of that is now small enough to warrant a starter position. Those who are eager to invest in a future EV giant can start small positions. I would not consider this a candidate for averaging down, not even here.

Options investors who want to eventually own shares should consider selling puts instead. This would make their entry points even lower, or create cash in the process.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.