Rivian’s Stock Drops 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 over 20%, marking the largest daily percentage decline since May last year. The decline came after Rivian unveiled plans to issue $1.5 billion worth of convertible green bonds, causing concerns among investors.

The convertible green bonds, which will mature in October 2030, can be converted to either cash or Rivian’s shares. The company aims to utilize the funds to “de-risk” the launch of its R2 sports utility vehicle in Georgia. This move follows Rivian’s issuance of a $1.3 billion convertible green bond earlier this year to support the launch of its smaller R2 vehicle family.

Investors were taken by surprise with the timing of the bond offering, leading to worries about potential dilution of cash flow. Elliot Johnson, Chief Investment Officer at Evolve ETFs, expressed concerns about the speculative nature of Rivian’s business and the potential impact on earnings.

Rivian has been actively expanding its production capabilities to keep up with market leader Tesla while also contending with price reductions in the electric vehicle market. Despite the stock decline, Rivian exceeded expectations in the third quarter by producing 16,304 vehicles and delivering 15,564 vehicles to customers. The company is on track to deliver 52,000 vehicles this year.

Rivian anticipates revenue to reach up to $1.33 billion, doubling from the previous year and aligning with analyst estimates. As of September 30, the company had approximately $9.1 billion in cash on its balance sheet, down from $10.2 billion in June. Rivian’s CEO, Robert Scaringe, previously stated that the company has enough funds to sustain operations until 2025.

While the stock decline may raise concerns, Rivian remains committed to its growth plans and the successful launch of its electric vehicle lineup. The company’s focus on sustainable transportation solutions and its partnership with Amazon continue to position it as a key player in the evolving electric vehicle industry.