Key Takeaways
- Rivian shares rose 50% in after-hours trading on Tuesday after reports that German automaker Volkswagen plans to invest $5 billion in the electric-vehicle startup as part of a joint venture to develop industry-leading automotive software technology.
- Volkswagen will invest $1 billion initially in the EV maker and plans to inject another $4 billion into the company by 2026.
- Rivian founder and CEO RJ Scaringe said the partnership will enable the company to leverage its technology throughout Volkswagen’s global reach and secure the capital it needs for sustained growth.
- If Rivian shares can break out of the resistance zone between $15 and $20, it could pave the way for a test of the high of $28.06 recorded last July.
Rivian (RIVN) shares soared 50% in after-hours trading on Tuesday on news that German automaker Volkswagen (VWAGY) plans to invest $5 billion in the electric vehicle (EV) startup as part of a joint venture to develop industry-leading vehicle software technology.
Volkswagen will invest $1 billion initially in the EV maker and plan to inject another $4 billion by 2026, the two automakers said in a joint statement late Tuesday.
The first $1 billion from Volkswagen will consist of unsecured convertible notes that will be converted into Rivian shares after December 1, according to the announcement.
“We expect this partnership will not only bring our software and associated zone architecture to a broader market through the Volkswagen Group’s global reach, but also secure the capital needed for significant growth,” Rivian founder and CEO RJ Scaringe said in a statement.
The joint venture comes after Ford (F) divested itself of a majority stake in the EV company last year and backed away from initial plans to co-develop plug-in vehicles with California-based Rivian. Over the past two years, EV automakers have struggled with shrinking profit margins as sales slowed due to increased competition from China and steep price cuts caused by rising interest rates.
Rivian reported a $1.45 billion loss in its most recent quarter as it upgrades manufacturing facilities to prepare for the launch of its updated lineup of pickup trucks and SUVs and its R2 and R3 mid-size platforms, due to go on sale from 2026. In an investor call Tuesday night, Scaringe said the joint venture would help the EV maker on its path to cash-flow positive, adding that Volkswagen’s investment would help the company scale up production of its next-generation vehicles.
Watch this important resistance zone on Rivian’s charts
Since Rivian’s shares plunged 25% in late February, they have formed an inverted head and shoulders pattern, a bottoming pattern that predicts a reversal of a downward trend.
In fact, the expected surge in stocks on Wednesday will likely confirm the formation of the pattern after a solid breakout above the neckline.
Going forward, investors should monitor the key area on the chart between $15 and $20, where the price faces a resistance zone from a number of notable peaks and valleys dating back to January of last year. A breakout above this key technical area could pave the way for the EV maker’s shares to test the all-time high of $28.06 reached last July.
Rivian shares rose 49.9% to $17.93 in after-hours trading on Tuesday.
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