Electric car maker Rivian shares record drop after convertible bond issuance


A sign outside the Rivian Automotive electric truck manufacturer’s factory in Plymouth, Michigan, USA, on July 15, 2022.Reuters/Kevin Krolicki/File photo with permission

NEW YORK, Oct 5 (Reuters) – Rivian Automotive Inc (RIVN.O) shares fell nearly 23% on Thursday, their biggest one-day drop since going public in 2021, after Rivian Automotive Inc (RIVN.O) unveiled plans to issue $1.5 billion worth of bonds. of convertible green bonds.

Irvine, Calif.-based Rivian expects the bonds, which are due in October 2030 and are convertible into cash or stock, will help it “lower the cost” of launching its R2 sport utility vehicle in Georgia, a Rivian spokesman said. risk. Reuters reported on Wednesday.

This is the second time in less than a year that Rivian has issued such a green bond, which raises funds from investors seeking to support climate plans. The company issued a $1.3 billion convertible green bond in March to support the launch of its smaller R2 car range.

Rivian shares fell 22.9% to close at $18.27, a three-month low. The stock has fallen about 1% year to date and is currently down 77% from its November 2021 initial public offering price of $78.

“This financing comes earlier than expected,” said Elliot Johnson, chief investment officer of Evolve ETFs, which manages more than $5.2 billion in assets and includes investments in electric vehicle startups such as Rivian.

Johnson added: “So transporting the same number of cars, profitability is stable, they’re raising cash earlier than people think and cash flow may be diluted – I think that’s a concern,” Johnson added. Because it’s still seen as a speculative business.”

Rivian, which is backed by e-commerce giant Amazon (AMZN.O), has been burning cash to ramp up production and keep pace with market leader Tesla Inc (TSLA.O), which has slashed prices. The company produced 16,304 vehicles and delivered 15,564 vehicles to customers in the third quarter, exceeding expectations.

The company said on Monday it expected to deliver 52,000 vehicles this year, disappointing many investors and analysts who had expected it to raise its production target.

Rivian said on Wednesday it expected third-quarter revenue to reach $1.33 billion, more than double the same period last year and in line with analysts’ expectations, according to London Stock Exchange Group (LSEG).

Rivian had about $9.1 billion in cash on its balance sheet as of Sept. 30, down from $10.2 billion in June. In August, Rivian CEO Robert Scaringe said the company had enough money to last until 2025 as it controlled costs.

Rivian is currently burning about $1 billion per quarter, is far from profitable, and the company’s new manufacturing facility in Atlanta will be very expensive, said CFRA Research analyst Garrett Nelson, who reiterated the price at $15 A “sell” rating on the electric vehicle maker’s stock. Target.

“We think this announcement undermines one of the bulls’ key arguments, which is that the company has ample cash and liquidity, so its short-term capital needs are low, and it’s the best of the bad among the EV upstarts. “house builders,” Nielsen wrote in an investor note.

Some investors said it would be prudent to issue bonds now, even if the funds are not needed immediately, because markets could become more nervous.

LSEG data shows that the median target price of 24 analysts currently covering Rivian stock is $30, with a “buy” recommendation.

Reporting by Chibuike Oguh in New York and Abhirup Roy in San Francisco; Editing by Lance Tupper, Alexandra Hudson, Diane Craft and David Gregorio

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Chibuike’s reporting focuses on large U.S. private equity firms, including Blackstone, KKR, Carlyle and Apollo. He has worked at Bloomberg News and holds master’s degrees in journalism from New York University and Edinburgh Napier University. Contact: 332-999-6154

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