Rivian Stock Gains On $5.8 Bln JV With Volkswagen

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(RTTNews) - Shares of Rivian Automotive, Inc. gained around 10 percent in the extended trading on Nasdaq on Tuesday after the electric vehicle maker announced a joint venture partnership with German auto major Volkswagen Group, with a total deal size of up to $5.8 billion.

The new joint venture, Rivian and VW Group Technology, LLC, is intended to create next-generation electrical architecture and vertically integrated software for electric vehicles.

The JV will combine Rivian's software and electrical hardware technology as well as Volkswagen's significant global scale and vehicle platform competencies across a variety of segments and price points.

Total deal size is composed of a convertible note of $1 billion, which was issued and funded in June 2024 and will automatically convert into Rivian equity on December 1, 2024.

Further, Volkswagen will make a cash payment of $1.3 billion to Rivian in connection with the closing of the JV, as consideration for licensing of background IP and a 50 percent equity stake in the JV.

The German automaker will also make an additional $1 billion investment into Rivian equity no earlier than June 2025, and an additional $750 million investment into Rivian equity no earlier than January 2026, both on certain conditions.

An additional $250 million investment into Rivian equity will be made no earlier than January 2026.

In addition, Volkswagen will make available for the benefit of Rivian a $1 billion loan in October 2026, and an additional $460 million investment into Rivian equity which will be funded at the earlier of January 3, 2028 or the first production of a saleable Volkswagen Group vehicle using the joint venture's technology.

The JV will be headquartered in Palo Alto, California, and governed by a Co-CEO structure. Wassym Bensaid, Rivian's Chief Software Officer, will also serve as Co-CEO and Chief Technology Officer of the JV, with technical responsibility.

Further, Carsten Helbing, Volkswagen's Chief Technology Engineer, will serve as future Co-CEO and Chief Operating Officer of the JV, with its commercial responsibility.

Bensaid and Helbing will each maintain responsibilities at Rivian and Volkswagen Group, respectively.

The JV Board will be composed of four members, with two each from Rivian and Volkswagen Group.

Rivian will transfer the majority of the initial software and hardware teams responsible for developing the network architecture and full software stack within the JV. From Volkswagen, technical and non-technical employees are also expected to join.

Under the deal terms, Volkswagen, through 2028, will fund 75 percent of the shared platform costs within the JV, while Rivian will fund 25 percent of these costs. Each business will fund 100 percent of the development costs exclusively designed for its vehicles and businesses.

In 2029 and beyond, shared costs will be split equally. However, beginning in 2029, Volkswagen will fund an incremental $100 million per year of the JV's shared costs which will reduce Rivian's shared costs.

Rivian expects that the initial and planned investments from Volkswagen, in addition to its current cash, cash equivalents, and short-term investments, will help it to fund key future growth opportunities such as R2 and R3, key vertically integrated technologies, manufacturing capacity expansion, and its go-to-market footprint and capabilities.

In a statement, Rivian said, "The combination of Rivian's electrical architecture and software platform and Volkswagen Group's global scale, broad segment coverage, and capabilities uniquely position the joint venture to be a leader in the development of software and associated zonal electrical architecture that is designed to create structural cost advantages and be scalable across multiple vehicle brands, segments, price points, and international markets."

On the NasdaqGS, Rivian shares closed Tuesday's regular trading at $10.58, down 4.17 percent. Following the news of the upgraded investment, the shares gained 9.5 percent in the after-hours trading at $11.58.