Why Are Rivian Shares Still Rising Today?

shares Rivian Automotive (NASDAQ:RIVN) They were still up after the company announced Wednesday afternoon that it had signed a deal with . volkswagen this could be worth well over $5 billion electric vehicle (EV) constructive.

As of 1:30 PM ET, Rivian’s shares were up about 18.3% from Tuesday’s closing price.

Rivian is a deal that will greatly ease the minds of investors

Under the agreement, first announced in June, Rivian and Volkswagen formed a joint venture to develop and commercialize Rivian’s “regional” EV architecture. The regional architecture to be implemented in Rivian’s upcoming R2 SUV could provide an extremely flexible technical basis for EVs of different sizes and price points. Among automakers outside China, only Tesla’s There is something similar.

Rivian’s next model is the mid-size R2, which will be released in 2026. Image source: Rivian.

The joint venture will develop the architecture into something that can support a range of upcoming new EVs from brands in the Volkswagen group. The deal includes a series of payments from Volkswagen to Rivian as key milestones are met, as well as a $1 billion credit option that would bring the total potential value of the deal to approximately $5.8 billion by early 2028.

Volkswagen will receive Rivian’s shares in exchange for a large portion of these payments. But for Rivian shareholders, any concerns about dilution should be more than offset by the security that cash from VW would provide the California EV maker.

Rivian has a funded path to profitability

Here’s the key takeaway for Rivian investors: This deal raises the possibility that Rivian will have the cash to reach sustainable scale, no matter what happens in the U.S. political arena.

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John Rosevear It has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a feature disclosure policy.