Rivian's shares continue to climb in value today.
Rivian's shares continue to climb in value today.
Rivian Automotive's (RIVN) shares kept soaring on Wednesday afternoon, following the company's announcement of a agreement with Volkswagen. This deal, valued at over $5 billion for Rivian, was finalized.
At 1:30 p.m. ET, Rivian's shares saw an increase of approximately 18.3% compared to the previous day's closing price.
An agreement expected to boost investor confidence
The agreement, initially discussed in June, involves a collaboration between Rivian and Volkswagen to develop and market Rivian's "zonal" electric vehicle (EV) architecture. This architecture, set to be utilized in Rivian's forthcoming R2 SUV, offers a versatile technical foundation for EVs of various sizes and price ranges. Apart from automakers in China, only Tesla has a similar setup.
Through this joint venture, the zonal architecture will be transformed to support a series of upcoming EV models from Volkswagen group brands. The deal includes periodic payments from Volkswagen to Rivian as significant milestones are achieved, as well as an option for a $1 billion loan. This option brings the total value of the deal to about $5.8 billion by early 2028.
In exchange for most of these payments, Volkswagen will receive shares of Rivian. However, for Rivian shareholders, any worries about dilution should be alleviated by the financial security provided by Volkswagen's incoming investments to Rivian, based in California.
Rivian has a secured pathway to profitability
In summary, Rivian investors need to know this deal increases the chances that Rivian will have the necessary funds to achieve and maintain growth, regardless of the political landscape in the U.S.
This partnership with Volkswagen is expected to attract more investors to Rivian, given the potential financial boost it brings. With the influx of funds, Rivian can expand its investing opportunities in the finance sector, enhancing its overall financial stability.
The partnership with Volkswagen could also lead to new avenues of money-making, as Rivian's electric vehicle architecture is set to be utilized in Volkswagen's upcoming electric models, potentially generating additional revenue streams.