Rivian (RIVN) surged 39% in premarket trading after news of its $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 owned joint venture.
The company is scheduled to hold an investor meeting at its Illinois factory on Thursday, so I think the stock price could remain volatile through the weekend.
There are a few ways to elaborate on Rivian and VW’s new partnership.
Impact on Libyans
Rivian has gone from Wall Street being concerned about its need to raise more capital (speculations have put the figure at more than $4 billion) to eliminating that risk in the medium term.
“A $3 billion capital infusion between 2024 and 2026 should help fund Rivian through the launch of R2 and the expansion of its Georgia facility,” Jefferies analyst Philippe Houchois said in a client note.
What does this mean for the entire automotive industry?
Alexander Potter of Piper Sandler believes the deal sends an important signal to the entire auto industry and many investors.
“Specifically, it suggests that automakers need their own ECUs, electrical architecture, and software to control themselves. Rivian and Tesla (TSLA) have long insisted on mastering these technologies in-house, and now Volkswagen is (apparently) looking to copy their approach. China’s new brands are moving at unprecedented speed, and it is only through vertical integration that other automakers can keep up,” Potter said.
Spotlight on Lucid
Citi’s Itai Michaeli has accused Lucid of being a spinoff trade of the deal.
“I’d cite Lucid (down 41% YTD) as a stock that could be interesting going forward given its best-in-class battery efficiency and willingness to license to other automakers. Also, the proposed VW-Rivian joint venture could improve EV sentiment more broadly,” Michaeli says.
Lucid shares were up 9% in premarket trading, and the company’s ticker page was the top trending ticker on Yahoo Finance.
