Rivian Stock Exploded Today. Here's What Investors Need to Know.
Rivian Stock Exploded Today. Here's What Investors Need to Know.
Rivian Automotive (NASDAQ: RIVN) received some surprising but welcome news last night. Even after the stock jumped by 8% yesterday, it soared by as much as another 37% Wednesday morning. A new investment and partnership has the stock flying.
While the stock pared some of this morning's gains, it remained higher by 22.7% as of 12:45 p.m. ET. That's because of the announcement that Volkswagen is investing up to $5 billion in Rivian over the next two years.
An investment to save the day
There's a reason Rivian shares were lower by nearly 50% year to date heading into yesterday's trading: The company has been burning cash. It has gone through more than $4 billion of its cash hoard in the last year. On top of that, it doesn't expect to produce any more EVs in 2024 than it did last year.
The investment from Volkswagen comes at a critical time. It includes $1 billion up front in the form of a convertible bond. Another $2 billion will be in common stock split between 2025 and 2026, subject to certain milestones. The final $2 billion is related to a new joint venture (JV) intended to create "next-generation electrical architecture and best-in-class software technology," according to a joint press release.
Rivian poured through cash in the last year as it retooled its production lines to prepare for its next-generation R2 vehicle platform. Production is scheduled to begin on those lower-priced EVs next year, with deliveries starting in 2026. That makes the timing perfect for this new capital infusion.
What's next for Rivian?
Rivian's cash was also used to continue to develop its in-house battery and electrical technologies. Volkswagen's investment helps to validate those research and development (R&D) investments.
Rivian now should be able to launch its R2 vehicles without needing any further capital infusions. It also will have new funds to continue to develop leading EV technologies. That lowers the risk on an investment in Rivian, even after today's gains.
Should you invest $1,000 in Rivian Automotive right now?
Before you buy stock in Rivian Automotive, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Rivian Automotive wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $772,627!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of June 24, 2024
Howard Smith has positions in Rivian Automotive. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool has a disclosure policy.