Rivian’s Stock Declines as Company Announces $1.5 Billion Convertible Green Bond Offering

Rivian Automotive Inc, the electric vehicle maker backed by Amazon, experienced a significant drop in its stock price on Thursday. Shares fell by nearly 23%, marking the largest daily percentage decline since the company’s debut in 2021. The decline came after Rivian announced plans to issue $1.5 billion worth of convertible green bonds.

The purpose of the bond offering is to “de-risk” the launch of Rivian’s R2 sports utility vehicle in Georgia. The bonds, which mature in October 2030, can be converted to either cash or Rivian shares. This is the second time in less than a year that Rivian has issued such a green bond, which aims to raise capital from investors interested in supporting climate-focused projects. In March, the company issued a $1.3 billion convertible green bond to support the launch of its smaller R2 vehicle family.

Investors reacted to the news by selling off Rivian’s shares, causing the stock to close at $18.27, its lowest point in three months. Since its initial public offering in November 2021, the stock has dropped 77% from its IPO price of $78.

Elliot Johnson, Chief Investment Officer at Evolve ETFs, expressed concerns about the early timing of the bond raise and potential dilution of cash flow. He noted that Rivian is still seen as a speculative business and highlighted the need to keep up with market leader Tesla, which has been slashing prices.

Despite the stock decline, Rivian reported positive third-quarter results, surpassing estimates by producing 16,304 vehicles and delivering 15,564 vehicles to customers. The company remains on track to deliver 52,000 vehicles this year. Rivian expects revenue to reach up to $1.33 billion, more than double from the previous year, in line with analyst estimates.

As of September 30, Rivian had approximately $9.1 billion in cash on its balance sheet, down from $10.2 billion in June. The company’s CEO, Robert Scaringe, previously stated that Rivian has enough funds to last through 2025. However, CFRA Research analyst Garrett Nelson reiterated his “sell” rating on Rivian’s shares, citing the company’s high cash burn rate and the expenses associated with its new manufacturing facility in Atlanta.

While the recent bond offering surprised some investors, the current median price target for Rivian’s shares among analysts is $30, with a “buy” recommendation. The company’s ability to raise capital through green bonds demonstrates its commitment to sustainability and its efforts to compete in the rapidly growing electric vehicle market.

In conclusion, Rivian’s announcement of a $1.5 billion convertible green bond offering has led to a decline in its stock price. However, the company’s positive third-quarter results and commitment to sustainability continue to attract investor interest.