Rivian Automotive Inc (RIVN.O) saw a substantial drop in its stock value on Thursday, experiencing its most significant daily percentage decline since its debut in 2021, with shares falling by nearly 23%. This decline came after the electric vehicle manufacturer announced its intention to issue $1.5 billion in convertible green bonds.
Rivian, headquartered in Irvine, California, anticipates that these bonds, which have a maturity date in October 2030 and offer the option to be converted into either cash or the company’s shares, will play a role in mitigating the risks associated with the launch of its R2 sports utility vehicle in Georgia. A company spokesperson explained this strategy to Reuters on Wednesday. Notably, this marks the second time in less than a year that Rivian is issuing such green bonds, attracting investment from those interested in supporting environmentally conscious projects. Previously, the company issued a $1.3 billion convertible green bond in March, aimed at supporting the introduction of its smaller R2 vehicle family.
The raise came earlier than expected
Rivian’s shares experienced a significant decline of 22.9%, closing at $18.27, representing a three-month low. The stock, which has declined by approximately 1% year-to-date, has now fallen by 77% from its initial public offering price of $78 in November 2021. Elliot Johnson, Chief Investment Officer at Evolve ETFs, which manages assets totaling over $5.2 billion, including investments in EV startups like Rivian, remarked that “The raise came earlier than expected,” and he expressed concern about potential dilution in cash flow. Johnson emphasized that Rivian is still perceived as a speculative business.
Company, backed by e-commerce giant Amazon (AMZN.O), has been actively spending capital to scale up production and compete with the market leader, Tesla Inc (TSLA.O), which has been reducing prices. In the third quarter, Rivian exceeded expectations by producing 16,304 vehicles and delivering 15,564 vehicles to customers. However, the company’s announcement on Monday that it is on track to deliver 52,000 vehicles for the year disappointed many investors and analysts who had anticipated an increase in the production target.
Rivian stock tumbles on convertible note offering, sales guidance
Company had sufficient funds to sustain its operations
According to data from LSEG, Rivian announced on Wednesday that it anticipates third-quarter revenue to reach up to $1.33 billion, which is more than double the figure from the previous year and aligns with analysts’ forecasts.
As of September 30th, Rivian had approximately $9.1 billion in cash on its balance sheet, a decrease from the $10.2 billion recorded in June. In August, Rivian’s CEO, Robert Scaringe, stated that the company had sufficient funds to sustain its operations through 2025 while actively managing costs.
