Rivian automotive industry (NASDAQ: RIVN) Shares are hitting the brakes today after rising nearly 14% yesterday. That jump came after the company announced final terms for a joint venture (JV) with the global automaker Volkswagen. But shares of the electric vehicle (EV) startup were down 5% today, as of 11:15 a.m. ET.
Investors welcomed the details announced yesterday at the closing of the joint venture. But the partnership was previously announced, so today’s drop likely reflects that fact, as well as uncertainty about Rivian’s long-term success.
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Investors may be wondering which today’s response to the deal is the right one: yesterday’s peak or today’s decline. The answer is probably both. When the deal was initially announced, which included direct investments in Volkswagen’s Rivian and the creation of the joint venture, it was valued at a total of $5 billion. When the deal closed yesterday, the companies said it would now be worth $5.8 billion.
That’s clearly even better news for Rivian and a reaffirmation that Volkswagen is deeply committed to using the company’s EV technology. So the sharp rise in Rivian’s stock was justified, especially since the shares fell more than 20% in the last three months before yesterday’s jump.
But the rewards of the investment are a little further ahead, so some investors appeared to hold on to the gains from the stock’s peak. The companies say the joint venture will work “to create a next-generation electric architecture and vertically integrated software for electric vehicles.”
Until 2028, Volkswagen will finance 75% of the costs within the JV, while Rivian will finance the balance. Each company will continue to design and develop its own vehicles within the individual companies. It’s still a long road to profitability and success for Rivian.
However, the deal could be a big factor in achieving that success. But it will be years before investors know whether Rivian’s lower-cost, next-generation R2 vehicle platform will resonate with consumers. That partly explains why the share price did not continue to rise today.
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