Rivian Automotive (NASDAQ: RIVN) obtained some stunning however welcome information final night time. Even after the inventory jumped by 8% yesterday, it soared by as a lot as one other 37% Wednesday morning. A brand new funding and partnership has the inventory flying.
Whereas the inventory pared a few of this morning’s beneficial properties, it remained increased by 22.7% as of 12:45 p.m. ET. That is due to the announcement that Volkswagen is investing as much as $5 billion in Rivian over the following two years.
An funding to save lots of the day
There is a motive Rivian shares have been decrease by almost 50% yr thus far heading into yesterday’s buying and selling: The corporate has been burning money. It has gone by way of greater than $4 billion of its money hoard within the final yr. On prime of that, it would not count on to supply any extra EVs in 2024 than it did final yr.
The funding from Volkswagen comes at a vital time. It contains $1 billion up entrance within the type of a convertible bond. One other $2 billion can be in frequent inventory cut up between 2025 and 2026, topic to sure milestones. The ultimate $2 billion is expounded to a brand new three way partnership (JV) meant to create “next-generation electrical structure and best-in-class software program expertise,” in response to a joint press launch.
Rivian poured by way of money within the final yr because it retooled its manufacturing traces to arrange for its next-generation R2 automobile platform. Manufacturing is scheduled to start on these lower-priced EVs subsequent yr, with deliveries beginning in 2026. That makes the timing excellent for this new capital infusion.
What’s subsequent for Rivian?
Rivian’s money was additionally used to proceed to develop its in-house battery and electrical applied sciences. Volkswagen’s funding helps to validate these analysis and growth (R&D) investments.
Rivian now ought to be capable of launch its R2 autos without having any additional capital infusions. It additionally can have new funds to proceed to develop main EV applied sciences. That lowers the chance on an funding in Rivian, even after right now’s beneficial properties.
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Howard Smith has positions in Rivian Automotive. The Motley Idiot has positions in and recommends Volkswagen Ag. The Motley Idiot has a disclosure coverage.
Rivian Inventory Exploded Right now. Here is What Buyers Must Know. was initially revealed by The Motley Idiot