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Why Rivian Stock Dropped Today

By Rich Smith – Dec 14, 2021 at 12:58PM

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Tesla's Rivian lawsuit moves one step closer to court.

What happened

Yesterday was a great day to own shares of electric start-up Rivian (RIVN -2.35%), with the stock revving 3.7% higher after MotorTrend named its R1T electric truck its Truck of the Year.

Today, however, Rivian's giving back all of those gains -- and more -- and is down 4.2% as of 12:20 p.m. ET on litigation jitters.

Gray masonry facade reads COURT HOUSE.

Image source: Getty Images.

So what

Specifically, Bloomberg is reporting that a California judge has ordered electric archrival Tesla (TSLA -3.25%) to accelerate its lawsuit against Rivian, alleging that the latter stole documents from the former. Within 30 days, Tesla must produce a list of "all the documents it claims were stolen by several employees" who left Tesla for Rivian.  

Then Rivian must tell Tesla what "steps" it took "to investigate and respond" to Tesla's theft allegations when they were initially made back in July 2020.

Now what

On the face of it, this judicial order doesn't actually sound like such bad news for Rivian. So why is it making Rivian investors nervous today?

Basically, what the judge's order does is accelerate the trial process and move things closer to a day when Tesla will either win or lose its lawsuit against Rivian. On the one hand, victory over Tesla would remove a big dark cloud over Rivian's future. But on the other hand, a loss in court could cripple Rivian at a critical time in its development, as it's working to bring its R1T electric truck and R1S electric SUV to market and simultaneously build 100,000 electric delivery vans for Amazon.

The good news for investors, though, is that after raising $11.9 billion in its IPO last month, Rivian probably has somewhere in excess of $20 billion in cash on hand today. Granted, much of that money will of course be earmarked for expanding production to build the tens of thousands of electric vehicles it now has on order awaiting fulfillment. But even so, that leaves billions more to finance the company's legal war with Tesla.    

When you get right down to it, Rivian's rush to market, and investors' enthusiastic acceptance of Rivian stock, has put Rivian in a position where Tesla cannot simply sue its rival into extinction. In my opinion, that's a pretty good reason to be optimistic about Rivian.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon and Tesla. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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