Rivian Automotive Inc (RIVN.O) witnessed a substantial drop in its stock value, plummeting over 20% on Thursday, marking its most significant daily percentage decline since May of the previous year. This decline was triggered by the company’s recent revelation of its intent to issue $1.5 billion in convertible green bonds.
Based in Irvine, California, Rivian disclosed that these bonds, set to mature in October 2030, offer investors the option to convert them into either cash or company shares. The primary objective behind this move, as conveyed by a company spokesperson to Reuters on Wednesday, is to mitigate risks associated with the forthcoming launch of the R2 sports utility vehicle in Georgia.
This marks the second occasion in less than a year that Rivian has chosen to pursue green bond issuance. These green bonds are designed to attract capital from investors keen on supporting environmentally-conscious initiatives. In March, the company had successfully issued a $1.3 billion convertible green bond to aid in the launch of its smaller R2 vehicle family.
During the trading session, Rivian’s stock experienced a sharp decline, plummeting to as low as $18.83, ultimately marking a 20.5% drop. Year-to-date, the stock has registered a modest 4% increase, but it closed down 19.5%.
Elliot Johnson, Chief Investment Officer at Evolve ETFs, which manages over $5.2 billion in assets, including investments in electric vehicle startups like Rivian, commented on the situation, stating, “The capital raise has occurred earlier than anticipated. Considering that they are not producing more vehicles than expected, earnings are in line, and the accelerated cash infusion may potentially dilute the value, this move raises concerns. Rivian is still perceived as a speculative business.”
Rivian, backed by e-commerce titan Amazon (AMZN.O), has been aggressively spending funds to expand production and compete with market leader Tesla (TSLA.O), which has been implementing price cuts. In the third quarter, Rivian outperformed expectations by manufacturing 16,304 vehicles and delivering 15,564 vehicles to customers. The company is on track to achieve a total delivery of 52,000 vehicles by year-end.
According to LSEG data, Rivian has projected that its revenue will surge to approximately $1.33 billion, more than doubling from the previous year, aligning with analysts’ estimates.
As of September 30, Rivian’s cash reserves stood at approximately $9.1 billion, down from $10.2 billion in June. In August, Rivian’s Chief Executive, Robert Scaringe, expressed confidence that the company possesses sufficient funds to sustain operations through 2025, as they diligently manage expenses.
Photo Source: Fox
5th October, 2023
Delino Gayweh
Serrari Financial Analyst
