Why Rivian Stock Is Exploding 50% Right Now

By Austin Smith Published Jun 25, 5:24PM EDT

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Shares of Rivian (Nasdaq:RIVN) | RIVN Price Prediction are exploding higher today, up nearly 9% during the day and up over 40% after hours on the news Volkswagen will invest $1 billion in Rivian, with plans to increase this amount to $5 billion.

Rivian+R1T | Debut of the Rivian R1T pickup at the 2018 Los Angeles Auto Show, November 27, 2018

If the rally holds, shares will open above $16 tomorrow, June 26th. Rivian hasn’t traded at that level since February of 2024. The timing couldn’t be better for Rivian.

CEO RJ Scaringe shared the news on X (formerly Twitter):

<blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”>This is exciting! Volkswagen Group CEO Oliver Blume and I are thrilled to announce the formation of a joint venture between our two companies. This partnership brings Rivian’s software and zonal electronics platform to a broader market through Volkswagen Group’s global reach and… <a href=”https://t.co/11XVNUo89J”>pic.twitter.com/11XVNUo89J</a></p>— RJ Scaringe (@RJScaringe) <a href=”https://twitter.com/RJScaringe/status/1805694762286301406?ref_src=twsrc%5Etfw”>June 25, 2024</a></blockquote> <script async src=”https://platform.twitter.com/widgets.js” charset=”utf-8″></script>

The company has faced concerns about it’s funding and cash burn as it ramps R1T and R1S production, while preparing for the upcoming R2 and R3 launches. Currently, the company still loses money on each vehicle sold. While the company has also announced an R1T and R1S refresh, and major cost savings associated with ‘project peregrine’, it is still far too early to know whether it will be enough to make the company profitable or just close the gap.

Further, the EV industry has been in retreat in 2024 with waning demand and buyers preferring hybrid and ICE vehicles. While bankruptcy has been discussed for Rivian, as we noted just yesterday:

They’re certainly not a contender for bankruptcy here.

Rivian, many people have talked about a bankruptcy with Rivian, but they have a strong balance sheet with nearly $6 billion in cash.

This alliance between the two companies addresses shortcomings for both. Volkswagen will gain essential software expertise, while Rivian will benefit from Volkswagen’s extensive manufacturing knowledge and financial support. With Volkswagen recently pulling back on their own EV ambitions, it still gives them exposure and upside to the space, while likely also keeping the door open to platform sharing in the future.

This is not the first major investment into Rivian, with Amazon (Nasdaq: AMZN) and Ford (NYSE: F) both being early, major investors in the company.

Other EV companies like Lucid (Nasdaq: LCID), Polestar (Nasdaq:PSNY) and Faraday Future will almost certainly be shopping for suitors after seeing this investment, if they aren’t already. The latter is considered viable bankruptcy candidate this year without renewed funding, while Lucid so far has been able to count on the Saudi Arabia’s Public Investment Fund for additional investments.

About the Author Austin Smith →

Austin Smith is a financial publisher with over two decades of experience in the markets. He spent over a decade at The Motley Fool as a senior editor for Fool.com, portfolio advisor for Millionacres, and launched new brands in the personal finance and real estate investing space.

His work has been featured on Fool.com, NPR, CNBC, USA Today, Yahoo Finance, MSN, AOL, Marketwatch, and many other publications. Today he writes for 24/7 Wall St and covers equities, REITs, and ETFs for readers. He is as an advisor to private companies, and co-hosts The AI Investor Podcast.

When not looking for investment opportunities, he can be found skiing, running, or playing soccer with his children. Learn more about me here.