Rivian’s stock is down about 1% year-to-date and dropped 77% from its initial public offering price of $78 in November 2021.
The share price of electric vehicle maker Rivian Automotive Inc. fell by 22.9% on Thursday, highest daily percentage decline since their listing. This came after the company announced plans to issue $1.5 billion worth of convertible green bonds which mature in October 2030. The shares closed at $18.27, a three-month low.
Rivian expects the bonds will help the launch of its R2 sports utility vehicle in Georgia. The company had also issued $1.3 billion convertible green bonds to support its smaller R2 vehicle family’s launch, in March 2023.
Elliot Johnson, Chief investment officer at Evolve ETFs, expressed concerns about Rivian’s financial strategies, given that it’s still seen as a high-risk or speculative business in the investment community. He believes that while the company is meeting delivery and earnings expectations, its decision to raise capital earlier than expected and the potential for dilution are worrying signs.
Rivian, backed by e-commerce company Amazon, has been investing huge to increase production, while competitors, including EV maker Tesla, have been decreasing prices.
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Rivian predicts its revenue for the third quarter will reach up to $1.33 billion. This forecast aligns with what analysts were expecting based on London Stock Exchange Group (LSEG) data.
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By the end of September, Rivian had approximately $9.1 billion in cash compared to $10.2 billion in June.
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Rivian’s chief executive officer (CEO), Robert Scaringe, mentioned in August that their current cash reserves should be sufficient until 2025 if they manage their expenses effectively.
Garrett Nelson, an analyst from CFRA Research, maintains a sell recommendation on Rivian’s stock with a target price of $15. He expressed concerns about Rivian’s liquidity and high capital requirements.
Some investors believe Rivian’s decision to issue bonds currently is wise, even if the funds aren’t urgently needed, as future market conditions might become more stringent.
The median stock price target from 24 analysts for Rivian stands at $30, and they generally have a buy recommendation, as indicated by LSEG data.
