Rivian (RIVN) is ripping higher by 39% in the pre-market after its buzzy $5 billion deal with Volkswagen (VWAGY).
The deal is broken down into a $3 billion direct equity investment into Rivian and $2 billion investment into a 50/50 owned joint venture.
The company will be holding an investor day Thursday at its Illinois factory, so I suspect the stock could stay volatile into the weekend.
Here are a couple ways to unpack the new Rivian/VW tie-up.
Implications for Rivian
Rivian goes from having Wall Street be concerned about the need to raise more funding (speculation was north of $4 billion) to removing that risk from the table in the medium term.
“The $3 billion equity injection over the 2024-26 period should keep Rivian funded through the launch of R2 and the build-up of the Georgia facility,” said Jefferies analyst Philippe Houchois in a client note.
What it means for the wider auto industry
Piper Sandler’s Alexander Potter thinks the deal sends a key signal to the auto industry at large, and its many investors.
“Specifically, it suggests that proprietary ECUs, electrical architectures, and software are necessary for automakers to control themselves. Rivian and Tesla (TSLA) have long advocated for in-house mastery of these technologies, and now Volkswagen is (apparently) attempting to replicate their approach. New Chinese brands are moving at an unprecedented speed, and only through vertical integration can other automakers hope to keep pace,” Potter says.
Spotlight on Lucid
Citi’s Itay Michaeli is calling out Lucid as a derivative trade off the deal.
“We’d highlight Lucid (where shares are down 41% YTD) as one name that could come into greater focus given its leading battery efficiency and openness to licensing to other automakers. It’s also conceivable that the proposed VW-Rivian JV could improve EV sentiment more broadly,” says Michaeli.
Lucid shares are up 9% pre-market. The company’s ticker page is tops on the Yahoo Finance trending ticker page.
