Rivian shares soar on Volkswagen’s massive cash infusion, starting immediately with $1 billion

Rivian shares soar before the opening bell after Volkswagen agreed to immediately invest $1 billion in the electric vehicle maker and a potential total of up to $5 billion in a deal. software development.

Shares of Rivian soared 40% before markets opened Wednesday after Volkswagen pledged to immediately invest $1 billion in the struggling electric vehicle maker, and a potential total of up to $5 billion in under a software development agreement.

Rivian’s market value soared nearly $86 billion shortly after its 2021 IPO, but it badly needs funding to develop its next vehicle and is bleeding cash. Volkswagen needs help with its software, where Rivian is considered a very important player.

Volkswagen will initially invest $1 billion in Rivian Automotive Inc., and plans to invest up to $4 billion more. This $4 billion includes an additional investment of up to $2 billion in Rivian common stock, which is expected to include two installments of $1 billion each in 2025 and 2026. A $2 billion investment related to the joint venture is expected to be divided between a payment at the start of the joint venture and a loan available in 2026.

“Not only is this partnership expected to bring our software and associated zonal architecture to an even broader market through Volkswagen Group’s global reach, but this partnership is also expected to help secure our capital requirements for substantial growth,” said Rivian founder and CEO RJ Scaringe. in a prepared statement.

Both companies plan to reduce their costs per vehicle produced while increasing their scale.

Rivian plans to license existing intellectual property rights to the joint venture, allowing Volkswagen Group to use Rivian’s existing electrical architecture and software platform.

“Our customers benefit from the focused partnership with Rivian to create cutting-edge technology architecture,” said Oliver Blume, CEO of the Volkswagen Group. “Through our cooperation, we will bring the best solutions to our vehicles faster and at lower costs.”

Vehicles using technology produced by the joint venture, first announced Tuesday evening, are expected to launch in the second half of the decade.

Irvine, California-based Rivian made a splash in its 2021 stock market debut, with shares soaring 53% and its market value approaching $86 billion, more than Ford and just below General Motors.

Investors were looking for the next big thing in the electric vehicle market, and Rivian already had some big-name backers.

Rivian landed a contract with to produce 100,000 electric delivery vans and a half-billion dollar contract with Ford.

But Rivian has yet to turn a profit, and its shares have fallen from their highs a few years ago. To conserve cash, Rivian suspended construction of a $5 billion electric truck factory in Georgia. Rivian said in March that there was no timetable for resuming work on the plant.

The joint venture with Volkswagen could be the boost needed and Wedbush’s Dan Ives called the deal a game changer for Rivian.

“Rivian will capitalize on this opportunity by using its strong capital track record to support future growth while vertically integrating its software platform and electric architecture while realizing further cost efficiencies and delivering improved vehicles across the board,” Ives said in a research note Wednesday.

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