By Michael Elkins
Rivian's (NASDAQ:RIVN) stock fell as much as 8% to $15.75 in late trading on Monday after the electric vehicle maker announced that it is seeking to raise $1.3 billion through the sale of green convertible bonds due in 2029. Rivian plans to sell bonds as weakening demand and lofty costs tighten a cash crunch around electrical vehicle makers.
According to a Rivian spokesperson, the capital from this offering will help facilitate the launch of Rivian's smaller R2 vehicle family. The spokesperson added that convertible debt was "optimal cost of capital versus selling equity at today's levels."
Rivian ended the fourth quarter with about $12B of cash, cash equivalents, and restricted cash on its balance sheet. But the rate of burn has been a concern to investors who see Rivian ending the year with half those reserves.
Rivian's bond plan "helps shore up liquidity into 2024, yet more is likely necessary," said Bloomberg Intelligence's Joel Levington. "The use of converts mirrors other electric-vehicle makers such as Lucid, Nio and Fisker, all of which have struggled."
Rivian's bond will mature in March 2029 and investors will have the option to convert the bonds into cash or shares in the EV maker. The interest rate, initial conversion rate and other terms of the bonds will be decided at the pricing of the offering.
Shares of RIVN are down 7.06% in pre-market trading on Tuesday.