After soaring to a record high just days after its IPO on Nov. 21 (at $78/share), EV maker Rivian’s fortunes have been a brutal one-way masterclass of disappointment after disappointment, with the price trading near record lows in recent months. , and flirting with single digits, down 93% from an all-time high of $172 in November 2021.
So one can almost feel happy for the long-suffering aspirations of RIVN, which saw its share price rise by more than 50% after hours when Germany’s largest car maker, Volkswagen, announced it was investing $5 billion to form a joint venture with Rivian, a lifeline will be thrown in due to the difficulty of launching and giving the German carmaker access to the US company’s EV technology.
As part of the investment, VW said it would invest $1 billion in Rivian immediately and another $4 billion over time. The new venture will be “equally managed and owned” and aims to develop “next generation” battery-powered vehicles and software, VW and Rivian said in a joint statement.
A strategic alliance provides cash-burning Rivian with a much-needed source of new capital after the company struggled to ramp up production and deliveries of its electric pickup trucks and SUV models. It comes ahead of Rivian’s previously planned investor day on Thursday. For VW, the German auto giant gets access to the EV startup’s software and architecture after years of trying to introduce plug-in vehicles with efficiency and functionality comparable to those from Tesla.
As part of the deal, Volkswagen will take an initial $1 billion equity stake in Rivian through unsecured convertible bonds that will be exchanged for Rivian stock on or after Dec. 1. That would make Volkswagen the company’s second-largest shareholder after Amazon.com, which will remain Rivian’s largest investor with a 16% stake worth nearly $2 billion as of Tuesday’s close (and $3 billion after news of the venture).
VW will then invest an additional $2 billion in Rivian stock through two equal tranches in 2025 and 2026, and will inject another $2 billion into the joint venture through a start-up payment and a loan available in 2026.
On a conference call, Rivian CEO RJ Scaringe said he and VW CEO Oliver Blume shared an “immediate realization” that the two agreed on a product strategy soon after they first met. That led to talks about working together, he said.
“Thanks to our collaboration, we will bring the best solutions to our vehicles faster and at lower costs,” Blume said in a company statement. “We are strengthening our technological profile and our competitiveness.”
Rivian went public in November 2021 at the height of excitement over the rapid arrival of the EV of the future, which is seen as a potential competitor to Tesla. Sure, Rivian’s early stock surge briefly gave it a market value that exceeds that of Ford and General Motors, but many of its fellow EV startups have since fallen as mainstream car buyers have turned away from expensive EVs. Rivian struggled to find a path to profitability and generate enough cash flow to fund its future.
That said, one wouldn’t be shocked if today’s merger went down in flames similar to the disastrous JV between GM and the fraud that was Tesla, where Mary Barra did exactly no due diligence before investing millions in the soon-to-be-defunct company. And indeed, Rivian has previously experienced the collapse of attempts to partner with established automakers. In November 2021, it abandoned plans to jointly develop electric cars with Ford, the first investor. And in December 2022, it postponed the contract for the production of electric vans with Mercedes-Benz AG.
For VW, the German auto giant gained access to the EV startup’s software and architecture after years of trying to introduce plug-in vehicles with efficiency and functionality comparable to those from Tesla Inc.
The two companies plan to introduce vehicles with the technology created by the joint venture in the second half of this decade, according to a joint statement from the companies.
Rivian shares exploded after hours, rising as much as 55%…
… to what is as much a knee-jerk reaction to the news as an epic short squeeze. As we reported earlier, approximately 133 million RIVN shares are currently short, just short of the all-time high and approximately 16.4% of the stock.
And if indeed Germany’s largest automaker is aggressively expanding into EVs in the US, then it’s time to look at the downstream beneficiaries, where one name stands out: with a record short interest of 112 million, or a whopping 28% of circulation. is Chargepoint, another name that has been largely left for dead (market cap of just $500 million), about to be the next to squeeze into the stratosphere?
From Zerohedge.com
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