This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
The recent tie-up between the struggling EV startup Rivian and the European legacy automaker Volkswagen (VW) turned out to be a huge rainmaker event for those in the know, precipitated by the stock's ~50 percent surge in the immediate aftermath of this paradigm-changing development.
Rivian's Remarkable Resurgence
Like the rest of its newly anointed peers in the EV industry, Rivian has had to contend with high operating costs and a relatively stagnant demand base for its pricey electric vehicles. In fact, last Friday, Rivian shares closed at $10.32 per share, constituting a loss of around 94 percent relative to its all-time high share price of $172 reached back in November 2021.
All of this changed on Tuesday when Rivian and Volkswagen announced a broad-based partnership, one that would see Volkswagen invest $5 billion to secure a joint venture with Rivian. Specifically, VW will initially buy a $1 billion stake in Rivian via a convertible note that will be exchanged for an equivalent number of Rivian shares on the 01st of December. This transaction would make VW Rivian's second-largest shareholder after Amazon's 16 percent stake.
Additionally, Volkswagen will invest $2 billion in Rivian in 2025 and 2026 via two equal installments of $1 billion each. Finally, the European automaker will make available an additional $2 billion at the inception of its joint venture with Rivian via a cash payment and a loan in 2026.
$RIVN Piper Sandler Reiterates Overweight PT $21
RIVN was indicated higher by nearly 50% following today's announcement that the company will pursue a JV with Volkswagen. Perhaps the most immediate implication is that RIVN's funding pathway is now largely de-risked, with Rivian…
— Kaushik (@BigBullCap) June 26, 2024
Wall Street has been quite receptive of this deal, with Piper Sandler pointing out that the tie-up has now "largely de-risked" Rivian's funding pathways.
Similarly, Morgan Stanley's Adam Jonas noted in a dedicated investment note:
"Anyone could have provided money, but VW may potentially value much more what Rivian has to offer. Rivian has software and SDV architectural solutions that VW needs."
This supportive commentary from sell-side analysts played an important role in reviving bullish spirits among Rivian investors.
$RIVN | Rivian Pre-Announces Q2 Deliveries of 13K-13.3K, above 10.2K Estimates
— Q2 Production: 9.1K-9.3K vs. 10.3K Expected
— Reaffirms Positive Gross Profits by Q4
— Maintains 2024 Production Guidance of 57K Units
— Plans $2.5B+ Capex Reductions (2023-2025)
— Projects 45%…— Wall St Engine (@wallstengine) June 27, 2024
Perhaps as a testament to the company's newfound confidence, Rivian has announced its Q2 deliveries early, reaffirming its target to achieve a positive gross profit by Q4 2024.
For the benefit of those who might not be aware, Rivian currently sells two EVs: the R1S SUV and the R1T pickup truck. In 2023, the company delivered 50,122 units and lost around $43,372 per vehicle sold in Q4 2023. The startup has had 2 layoff waves so far in 2024.
Just like Tesla, Rivian is betting the proverbial house on a more affordable EV. Dubbed the R2, the vehicle is expected to enter production in 2026 and start retailing from $45,000.
The Surprising Surge In The EV Startup's Call Volumes On Tuesday
It is pretty clear people knew about the $RIVN, Rivian VW Volkswagen deal before hand, and traded it.
Traders turned $100k into +$2,000,000.
People slammed $12 and $13 calls expiring Friday, heavily, all new volume, old bull OI stuck.
Last 14 days nonstop calls.
Unusual. pic.twitter.com/ONuywl6ZtP
— unusual_whales (@unusual_whales) June 26, 2024
This brings us to the crux of the matter. Unusual Whales has noted that "it is pretty clear people knew about the $RIVN, Rivian VW Volkswagen deal before hand, and traded it."
Incredible! Let’s check in on those $RIVN
$12 and $13 calls again. #RIVN$12c 6/28:
Monday 6/24 saw 7,566 volume.
Low of $.06 — average fill $.11
Tuesday 6/25 before the VW news broke saw 16,293 vol.
Low of $.15 — average fill $.34
Wednesday 6/26 following the news, those… https://t.co/BIiX1azAQO pic.twitter.com/pPEOBLP9Mz— Wolf of My Street🏡 (@Ryan__Rigg) June 27, 2024
Ryan Rigg, whose account closely follows the X account of Unusual Whales, has added additional color to this statement. Specifically, Ryan highlighted that Rivian's $12 call that expires on the 28th of June saw a volume of 7,566 this Monday. On Tuesday, before the news of a tie-up between Rivian and Volkswagen broke in the after-hours session, the call saw a volume of 16,293.
This volume-based discrepancy is much more pronounced for the $13 call that saw its daily volume surge by 327 percent on Tuesday.
Of course, readers should note that this is still educated conjecture and that a definitive determination as to any fraudulent activity can only be made by the SEC.
