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STOCK-BASED COMPENSATION
 9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION
2015 Stock Plan

The Company's 2015 Long-Term Incentive Plan ("2015 Stock Plan") permits the grant of stock options, restricted stock units (“RSUs”), and other stock-based awards to employees, non-employee directors, and consultants. Generally, the Company’s stock options vest based on a requisite service period of four years of continuous service and may be exercised only upon the occurrence of a Change in Control (as defined under the 2015 Stock Plan), which is a performance based vesting condition.
RSUs generally vest based on a requisite service period of four years of continuous service and the occurrence of an Initial Public Offering (as defined under the 2015 Stock Plan), which is a performance based vesting condition. The performance based vesting conditions for options and RSUs are not deemed to be probable until such events occur. Therefore, as there was not yet a Change in Control or Initial Public Offering as of September 30, 2021, no outstanding awards granted under the 2015 Stock Plan had vested as of September 30, 2021 (see Note 14 “Subsequent Events” for updates concerning the Company’s November 2021 IPO). As of September 30, 2021, 114 million shares were reserved for issuance under the 2015 Stock Plan.

In January 2021, the Company granted a stock option covering approximately 27 million shares valued at approximately $241 million to its Chief Executive Officer. The award has both time based and performance based vesting components. The time based component vests over a requisite service period of six years following a Qualified IPO (as defined within the award). The performance based component vests in installments based on the achievement of share price goals following a Qualified IPO (as defined within the award), measured over a specified performance period ending on the tenth anniversary of the award.

As the performance based vesting conditions for stock options and RSUs are not deemed to be probable of occurring until the Change in Control or Initial Public Offering occurs, the Company has not recognized any stock-based compensation expense as of September 30, 2021, and there was approximately $1,389 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the 2015 Stock Plan at September 30, 2021 (see Note 14 “Subsequent Events” for updates concerning the Company’s November 2021 IPO). This unrecognized amount includes the increase resulting from the modification of certain RSUs, as described in the following paragraph.

During June 2021, the Company modified the service based vesting terms of approximately 17 million RSUs. As the modified RSUs contain a performance condition that is not satisfied until an IPO occurs, the fair value of the RSUs was remeasured on the date of modification, which resulted in an increase in unrecognized compensation cost of approximately $322 million.

Fair Value Assumptions

All stock options granted during the nine months ended September 30, 2020 and 2021 were granted with an exercise price equal to or greater than the fair market value of Rivian Automotive, Inc.'s stock at the date of grant. The Company estimates the fair value of each stock option award using a Black-Scholes option pricing model.

Prior to the three months ended September 30, 2021, the fair value of RSUs was measured on the grant date based on an independent appraisal of the fair market value of the Company’s common stock. The independent appraisal used a market approach with an adjustment for lack of marketability given that the shares underlying the awards were not publicly traded (see Note 14 “Subsequent Events” for updates concerning the Company’s November 2021 IPO). This assessment required complex and subjective judgments regarding the Company’s projected financial and operating results, business risks, liquidity of ordinary shares, operating history, and prospects.
In light of the difference between the fair value of a share of the Company’s common stock applicable to stock options and RSUs granted during the three months ended September 30, 2021, based on an independent appraisal, and initial information received in estimation of the Company’s IPO price range as well as the proximity of such grants to the IPO, the Company established the fair value of a share of the Company’s common stock applicable to stock options and RSUs granted from July 20, 2021 onward using a straight-line interpolation from the July 20, 2021 fair value estimated using an independent appraisal to the midpoint of the initial price range in order to calculate unrecognized stock-based compensation expense (see Note 14 “Subsequent Events” for updates concerning the Company’s November 2021 IPO).