Rivian Announces Plans to Raise Funds and Provides Guidance for Q4 Sales

Rivian Automotive, the electric vehicle (EV) manufacturer, recently made headlines by revealing that it delivered more units than expected in the third quarter. However, the company’s stock experienced a decline after it announced disappointing guidance for the current quarter and its intention to raise additional funds. Despite these developments, investors need not be overly concerned.

Rivian’s stock declined by 7.6% in premarket trading following the announcement. This drop is not uncommon when convertible notes are issued. Convertible notes are a form of debt that can be converted into shares, potentially diluting the holdings of existing shareholders. Additionally, some investors may engage in short selling, which involves borrowing shares they don’t own and selling them. This selling pressure can contribute to a decline in stock prices.

Alongside the notes offering, Rivian disclosed that its third-quarter sales would amount to approximately $1.31 billion, slightly below Wall Street’s expectations of around $1.38 billion. This miss can be attributed to lower prices realized on each sale, as EV prices have been decreasing in the U.S. due to price cuts from competitors like Tesla and Ford Motor.

Rivian’s vehicles, known for their sporty performance and electric-powered pickup truck capabilities, have garnered interest from American buyers. However, with an average price of around $80,000 and the high costs associated with their development, the company has been burning through cash. In the second quarter, Rivian sold trucks at an average loss of $33,000.

It’s important to note that the car business relies on scale, with most manufacturers needing to deliver hundreds of thousands of vehicles to generate profits. Rivian, currently delivering tens of thousands, is still in the early stages of scaling up. Ford Motor, for example, reported a per-car loss of approximately $38,000 after selling about 47,000 electric vehicles in the first half of 2023.

Despite recent fluctuations, Rivian’s stock has seen a 25% increase since the beginning of the year. However, it remains 36% lower than its value 12 months ago. The company has utilized approximately half of its $18 billion cash pile and experienced a 70% decline in shares since its $12 billion initial public offering in 2021.

Moving forward, Rivian’s focus will be on reducing costs and streamlining production to achieve profitability. The company expects to turn a profit on its vehicles by 2024. These current losses are deemed necessary for future growth.

In conclusion, while Rivian’s recent guidance and plans to raise funds may have initially impacted its stock, it is important for investors to consider the company’s long-term growth prospects and its position within the evolving EV market.