After soaring to an all-time high just days after its Nov. 21 IPO (at $78/share), EV maker Rivian’s fortunes have been a brutal one-way masterclass, with disappointment after disappointment, with its stock trading near record lows in recent months, and flirting with single digits, down 93% from its all-time high of $172 in Nov. 2021.
So you can almost be happy for the long-suffering RIVN longs who saw their share price rise by more than 50% after Germany’s largest car company Volkswagen announced it would invest $5 billion in setting up a joint venture with Rivian, providing a lifeline to the future would bring. a difficult start and gives the German car manufacturer access to the technology of the American EV company.
As part of the investment, VW said it will immediately invest $1 billion in Rivian and another $4 billion over time. The new company will be “equally controlled and owned” and aims to develop “next generation” battery-powered vehicles and software, VW and Rivian said in a joint statement.
The strategic alliance will provide Rivian’s cash-burning business with a much-needed source of new capital after the company struggled to ramp up production and deliveries of its electric pickup and SUV models. It comes ahead of Rivian’s previously scheduled investor day on Thursday. For VW, the German auto giant will gain access to the EV startup’s software and EV architecture after it struggled for years to roll out plug-in vehicles with efficiency and functionality comparable to Tesla’s.
As part of the deal, Volkswagen will acquire an initial $1 billion stake in Rivian through an unsecured convertible bond that will convert into Rivian shares on or after December 1. This makes Volkswagen the company’s second largest shareholder, after Amazon.com. Amazon.com remains Rivian’s largest investor with a 16% stake, which was valued at nearly $2 billion on Tuesday (and $3 billion following news of the venture).
VW will then invest an additional $2 billion in Rivian shares through two equal tranches in 2025 and 2026, and will inject another $2 billion into the joint venture through a company incorporation payment and a loan available in 2026 comes.
On a conference call, Rivian CEO RJ Scaringe said he and VW CEO Oliver Blume shared the “immediate realization” that the two were aligned on product strategy shortly after first meeting. That led to conversations about collaboration, he says.
“Through our collaboration, we will provide the best solutions for our vehicles faster and at lower costs,” Blume said in the companies’ statement. “We are strengthening our technology profile and competitiveness.”
Rivian went public in November 2021 at the height of enthusiasm for the rapid arrival of the EV future, seen as a potential rival to Tesla. It’s true that an early surge in Rivian stock briefly gave it a market value greater than that of Ford and General Motors, but since then many of its fellow EV startups have fallen by the wayside as mainstream car buyers turn away from high-priced EVs. Rivian has struggled to find a path to profitability and generate enough cash flow to finance its future.
That said, you wouldn’t be shocked if the current partnership goes up in flames, much like the catastrophic joint venture between GM and the fraudster Tesla, where Mary Barra did exactly zero diligence before investing millions in the soon-to-be-defunct company. And indeed, Rivian has seen attempts at collaboration with established automakers fail before. In November 2021, it abandoned plans to develop electric vehicles with Ford, an early investor. And in December 2022, it suspended a deal to build electric vans with Mercedes-Benz AG.
For VW, the German auto giant will gain access to the EV startup’s software and EV architecture, after years of struggling to roll out plug-in vehicles with efficiency and functionality on par with Tesla Inc.
According to the companies’ joint statement, both companies plan to introduce vehicles with technology created by the joint venture in the second half of this decade.
Rivian shares exploded after hours, rising as much as 55%…
…to what is both a knee-jerk reaction to the news and an epic short squeeze. As we noted earlier, about 133 million shares of RIVN are currently short, just below the all-time high, and about 16.4% of the float.
And if Germany’s largest automaker does indeed aggressively expand into electric cars in the US, then it’s time to look at downstream beneficiaries, where one name stands out: with a record short stake of 112 million, or a whopping 28% of the float short, is Chargepoint, another name largely left for dead (market cap of just $500 million), about to enter the stratosphere?
By Zerohedge.com
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