What Happened?

Shares of electric vehicle manufacturer Rivian (NASDAQ:RIVN) jumped 21.3% in the morning session after the company announced a joint venture with vehicle manufacturer Volkswagen Group, valued at up to $5.8 billion, starting November 13, 2024. The joint venture is expected to help both companies develop next-generation electrical architecture and software technology for electric vehicles, covering all relevant vehicle segments, including subcompact cars. 

As a part of the deal, Volkswagen Group plans to invest up to $5.8 billion in Rivian and the joint venture by 2027. Volkswagen Group already made an initial investment of $1 billion in the form of a convertible note. Upon closing the joint venture, Volkswagen Group is expected to invest an additional $1.3 billion for IP licenses and a 50% equity stake in the joint venture. The rest of the investment, up to $3.5 billion, is expected to be a blend of equity, convertible notes, and debt at future dates based on clearly defined milestones. 

Overall, the deal highlights a unique opportunity for Rivian to improve the scale and efficiency of its operations using shared insights and resources from a brand like Volkswagen which has a broad market presence and respectable expertise.

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What The Market Is Telling Us

Rivian’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. But moves this big are rare even for Rivian and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was about 1 month ago when the stock dropped 9.4% on the news that the company cut its annual (2024) production estimate to between 47,000 and 49,000 vehicles (versus its prior guidance of 57,000 vehicles). Rivian cited supply chain issues partly caused by a shortage of components used to make some of its vehicles. The company also reported third-quarter production and delivery numbers, which fell short of consensus estimates. Overall, the updates suggest that Rivian might struggle to hit its sales targets heading into the last quarter of the year.

Rivian is down 40.9% since the beginning of the year, and at $12.47 per share, it is trading 48.8% below its 52-week high of $24.35 from December 2023. Investors who bought $1,000 worth of Rivian’s shares at the IPO in November 2021 would now be looking at an investment worth $123.90.

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