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STOCK-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION
Stock Plans

The Company's 2015 Long-Term Incentive Plan ("2015 Stock Plan") and 2021 Incentive Award Plan (“2021 Stock Plan” and, together, “Stock Plans”) permit the grant of stock options, restricted stock units (“RSUs”), and other stock-based awards to employees, non-employee directors, and consultants. The 2021 Stock Plan became effective when the registration statement filed in connection with the Company’s IPO became effective. The Company’s stock options have seven- or ten-year contractual terms and unvested stock options and RSUs generally are forfeited upon the termination of a grantee’s service. The Company has elected to recognize forfeitures as an adjustment to compensation expense for options and RSUs in the same period as the forfeitures occur. As of December 31, 2022, 76 million and 146 million shares were reserved for issuance under the 2015 Stock Plan and 2021 Stock Plan, respectively.

Generally, the Company’s stock options vest in annual installments based on a requisite service period of four years of continuous service and may contain performance conditions related to production and other targets. Stock options granted under the 2015 Stock Plan may be exercised only upon the occurrence of a Change in Control (as defined under the 2015 Stock Plan, which includes an IPO), which is a performance condition. RSUs generally vest in quarterly installments based on a requisite service period of 1 to 4 years of continuous service, upon the later of the quarterly vest date and six months after the occurrence of an IPO (as defined under the Stock Plans), which is a performance condition. Achievement of the Change in Control- and IPO-based performance conditions of stock options and RSUs granted under the 2015 Stock Plan was not deemed to be probable until such events occurred. Therefore, no awards granted under the 2015 Stock Plan vested, were expected to vest, or were exercisable prior to the Company’s November 2021 IPO. Accordingly, the Company recognized no stock-based compensation expense prior to the IPO. After the IPO, expense is recognized on an accelerated basis for these awards granted prior to the IPO due to the performance condition. For awards granted after the IPO, the Company has elected to use the straight-line expense recognition on awards with only service conditions.
In January 2021, the Company granted a stock option covering 27 million shares valued at $241 million to its CEO. A portion of the stock option contains only a service condition, which vests over a requisite service period of six years following a Qualified IPO (as defined within the award). The other portion of the stock option contains both a service and a market condition, which vests in installments based on the achievement of share price goals following a Qualified IPO, measured over a specified period ending on the 10th anniversary of the award.

During June 2021, the Company modified the service-based vesting terms of approximately 17 million RSUs. As achievement of the performance condition of the RSUs was not considered probable both before and after the modification, the fair value of the RSUs was remeasured on the date of modification, which resulted in an increase in unrecognized stock-based compensation cost of approximately $322 million. During October 2021, the Company modified the service-based vesting terms of approximately 5 million stock options. As achievement of the performance condition of the stock options was not considered probable both before and after the modification, the fair value of the stock options was remeasured on the date of modification, which resulted in an increase in unrecognized stock-based compensation cost of approximately $275 million.

In September 2022, the Company approved the payment of 2022 bonus incentives to be made under the 2021 Stock Plan in the form of stock-based awards, which will vest immediately upon grant in the first quarter of 2023. The 2022 bonus incentives were subject to certain performance conditions related to production and other targets. As of December 31, 2022, the total amount of accrued stock-based bonus incentives is $139 million within “Accrued liabilities” on the Consolidated Balance Sheets.

The following table summarizes the Company’s stock option and restricted stock unit activity during the year ended December 31, 2022:

Stock OptionsRSUs
Number of Shares
 (in millions)		Weighted-Average Exercise PriceWeighted-Average Remaining Contractual Life
 (in years)		Aggregate Intrinsic Value (in millions)Number of Shares
 (in millions)		Weighted-Average Grant-Date Fair Value
Outstanding at December 31, 202165 $12.06 37 $31.24 
Granted1 37.47 25 35.87 
Exercised / Vested(4)4.67 (19)36.25 
Forfeited / Cancelled(1)7.21 (6)41.50 
Outstanding at December 31, 202261 $12.98 6.8$456 37 $38.72 
Vested and expected to vest at December 31, 202261 $12.98 6.8$456 37 $38.72 
Exercisable at December 31, 202228 $5.02 5.8$386 — $— 

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2020, 2021 and 2022 was $2.28, $10.03, and $21.64, respectively. There were no stock options exercised during the year ended December 31, 2020. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2021 and 2022 was $127 million and $105 million, respectively. The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2020 and 2021 was $7.23 and $43.94, respectively. There were no RSUs vested during the years ended December 31, 2020 and 2021. The total fair value of RSUs vested during the year ended December 31, 2022 was $566 million.
During the year ended December 31, 2020 there was no stock-based compensation expense for the Stock Plans and 2021 Employee Stock Purchase Plan (“ESPP”). The following table summarizes Company’s stock-based compensation expense for the Stock Plans and ESPP by line item in the Consolidated Statements of Operations (in millions):

Years Ended December 31,
20212022
Cost of revenues$16 $60 
Research and development277 437 
Selling, general, and administrative277 490 
Total stock-based compensation expense$570 $987 

As of December 31, 2022, the Company’s unrecognized stock-based compensation expense for unvested awards was approximately $1,309 million, which is expected to be recognized over a weighted-average period of 5.7 years for stock options and 2.3 years for RSUs.

Fair Value Assumptions

The fair value of the stock options granted to the CEO in January 2021 was estimated using a Monte Carlo simulation capturing scenarios of the Company's projected stock price over the ten-year time horizon, with the resulting intrinsic value at maturity of the stock options in each scenario discounted to present value.

The assumptions used in the Monte Carlo simulation were as follows:

Year Ended December 31, 2021
Volatility50.0 %
Dividend yield— %
Risk-free rate1.1 %
Maturity (in years)10.0
Initial stock price$21.72

The exercise price of all stock options granted during the years ended December 31, 2020, 2021 and 2022 was equal to or greater than the fair market value of Rivian's stock at the date of grant. The Company generally estimates the fair value of stock options using a Black-Scholes option pricing model. Expected volatility is based on a weighted-average of historical volatility rates of peer companies and the Company’s implied volatility. The dividend yield is estimated based on the rate at which the Company expects to provide dividends. The risk-free rate is based on the United States Treasury yield curve for zero-coupon Treasury notes with maturities approximating the respective expected term of the stock option. The expected term represents the average time the Company’s stock options are expected to be outstanding. As the stock options were not exercisable prior to the IPO, the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. As a result, for stock options, the expected term is estimated based on the weighted-average midpoint of expected vest date and expiration date.

The weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows:

Years Ended December 31,
202020212022
Volatility41.3 %49.5 %55.5 %
Dividend yield— %— %— %
Risk-free rate0.3 %1.1 %2.9 %
Expected term (in years)5.35.66.8

Prior to the Company’s IPO, the stock price input to the estimated fair value of stock options and the fair value of RSUs was measured on the grant date (or modification date, if appropriate) 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. This assessment required complex and subjective judgments regarding the Company’s projected financial results. The appraisal incorporated a backsolve method to the Company’s most recent equity issuance and a probability-weighted expected return method “(PWERM)” that estimated equity value in an IPO scenario. The fair value of a share of the Company’s common stock was estimated by weighting the backsolve and PWERM valuation methods based on the anticipated probability of an IPO as of each valuation date.

In light of initial information received in estimation of the Company’s IPO price range and the proximity of stock-based awards granted from July 20, 2021 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.

The grant-date fair value of stock options granted after the IPO is measured using the Black-Scholes option pricing model described above. The grant-date fair value of RSUs granted after the IPO is equal to the closing trading price of the Company‘s common stock on the grant date.

Employee Stock Purchase Plan
In November 2021, the Company adopted the ESPP. The ESPP is designed to allow eligible employees to purchase shares of Class A common stock at a 15% discount, generally at intervals of approximately six months, with their accumulated payroll deductions. The number of shares of Class A common stock authorized for sale under the ESPP is equal to the sum of (i) 22 million shares of Class A common stock and (ii) an annual increase on the first day of each year beginning on January 1, 2022 and ending on January 1, 2031, equal to the lesser of (A) 1% of the aggregate number of shares of all classes of common stock outstanding on the last day of the immediately preceding year and (B) such smaller number of shares of Class A common stock as determined by the board of directors; provided, however, that no more than 185 million shares of Class A common stock may be issued under the ESPP. As of December 31, 2022, 28 million shares were reserved for issuance under the ESPP.