Among the more beaten-down EV stocks that are seeing some love today, Arrival (NASDAQ:ARVL) is making a move higher. Shares of ARVL stock are up more than 2.5% in today’s session, on par with some of the more prominent names in this space. And while Arrival isn’t necessarily seeing the gains other small to medium-sized EV companies are today, it’s on the radar for several reasons.
First, the EV sector as a whole is exploding higher, joining AI stocks and other more speculative high-growth areas of the market in a synchronized surge. A range of macro factors appear to be driving bullish sentiment across the broader space. Notably, this past week’s interest rate pause by the Federal Reserve has stoked interest in companies that may benefit from potentially lower rates (or at least rates that are held steady for some time).
Additionally, Arrival announced a debt-to-equity swap earlier this month, in which $20 million of debt would be turned into common equity. A previous agreement with Antara Capital was amended, resulting in $20 million of convertible notes yielding 3.5% being swapped for a little more than 3 million shares of ARVL stock.
Let’s dive into what to make of this move and whether more upside could be on the horizon for Arrival.
Can ARVL Stock Continue Its Move Higher?
Typically, debt-to-equity swaps are beneficial for shareholders who want to see a given company improve its balance sheet and who may believe a given stock’s valuation is worth doing so. In the case of Arrival, whose stock has been down considerably over the past two years, such a swap may have raised eyebrows (and indeed appears to have done so). Thus, I’m not sure this is necessarily a positive factor for shareholders, but it is one that many seem to be looking through as we head into the year’s second half.
Instead, it’s the market-driven sentiment for EV stocks that appears to be the big factor that matters for Arrival investors right now. If the tide is rising, companies like Arrival have more to gain from such momentum. And given Arrival’s valuation sits at less than $50 million at the time of writing, this stock is trading more like an option on the company being able to properly commercialize its revolutionary design process in making purpose-built EVs.
Personally, Arrival is a company I remain skeptical of, even at these lower levels. And while this stock may certainly participate in this sector-specific rally, it’s also one I think carries much higher risk. Thus, investors may want to take appropriate risk management measures if considering a position in this company right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
