Rivian (RIVN) is trading 39% higher in the pre-market following its buzzy $5 billion deal with Volkswagen (VWAGY).
The deal is split into a $3 billion direct equity investment in Rivian and a $2 billion investment in a 50/50 joint venture.
The company is holding an investor day at its Illinois facility on Thursday, so I suspect shares could remain volatile into the weekend.
Here are a few ways to unpack the new Rivian/VW pairing.
Consequences for Rivian
Rivian is moving from Wall Street being concerned about the need to raise more financing (speculation was over $4 billion) to eliminating that risk over the medium term.
“The $3 billion equity infusion over 2024-26 should keep Rivian funded through the launch of R2 and build-out of the Georgia facility,” Jefferies analyst Philippe Houchois said in a client note.
What it means for the wider automotive industry
Piper Sandler’s Alexander Potter believes the deal sends an important signal to the auto industry in general and to its many investors.
“Specifically, it suggests that proprietary ECUs, electrical architectures and software are necessary for automakers to monitor themselves. Rivian and Tesla (TSLA) have long advocated mastering these technologies internally, and now Volkswagen is (apparently) trying to replicate their approach. New Chinese brands are developing at unprecedented speed, and only through vertical integration can other automakers hope to keep pace. to keep,” says Potter.
Lucid in the spotlight
Citi’s Itay Michaeli calls Lucid a derivative of the deal.
“We would highlight Lucid (where shares are down 41% YTD) as a name that could gain more interest given its industry-leading battery efficiency and openness to licensing to other automakers. It is 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 sits at the top of Yahoo Finance’s trending ticker page.
