Rivian Automotive Inc. reminded investors just how costly it is to make its electric vehicles, and how much money they will need to continue making them. On Thursday, Rivian shares
plunged nearly 23% after the company surprised investors Wednesday evening with news that it would be raising $1.5 billion in convertible debt, in a private offering. The convertibles, due in 2030, will be offered to private institutions and holders will have the option to convert them into cash and stock, under certain circumstances and time periods. Unlike traditional bonds, convertibles are seen as dilutive to shares.
Late Thursday, Rivian priced the notes at about $23.29 per share of common stock, a premium of around 27.5% to its closing price of $18.27. While Rivian had mentioned an eventual debt offering during its earnings call in August, the timing was much sooner than expected, causing investors to get more nervous about how fast it is burning through cash. It had $10.2 billion in cash and equivalents in the second quarter and the company ended the third quarter with about $9.1 billion. In addition, it gave a sales outlook Wednesday that was pretty much on target with Wall Street’s current estimates. “They continue to burn through $1 billion in cash a quarter,” said Garrett Nelson, a CFRA analyst, who has a sell rating on Rivian. “Given the rate they are burning, it was clear that they need cash sooner than investors thought. The expectation was that they would do a capital raise next year. This blindsided investors.” Rivian is currently building a manufacturing plant ou …