{"id":69469,"date":"2023-10-06T11:06:36","date_gmt":"2023-10-06T15:06:36","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/rivian-convertible-stock-plan-causes-record-stock-drop-for-ev-maker\/"},"modified":"2023-10-06T11:06:39","modified_gmt":"2023-10-06T15:06:39","slug":"rivian-convertible-stock-plan-causes-record-stock-drop-for-ev-maker","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=69469","title":{"rendered":"Rivian Convertible Stock Plan Causes Record Stock Drop For EV Maker"},"content":{"rendered":"<div>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">Key takeaways<\/h2>\n<ul>\n<li>Rivian has confirmed it\u2019s raising a $1.5 billion convertible green note for institutional investors<\/li>\n<li>It\u2019s the second time the EV maker has done so in a year to raise cash<\/li>\n<li>Rivian\u2019s share price fell 23% in a day, a new record drop for the company since its 2021 debut<\/li>\n<\/ul>\n<p>Start-up EV maker Rivian has announced its intention to issue $1.5 billion worth of convertible green bonds in a move that has sent the company\u2019s share price plunging this week. It didn\u2019t help that the announcement was paired with missed sales estimates for the third quarter, further adding to Rivian\u2019s woes.<\/p>\n<p>The broader EV market is under pressure right now, with price cuts abound across the global market and deliveries falling under target. Rivian is less affected as a truck maker, but investors still have some doubts about the company\u2019s short-term financial future and whether it can turn things around after a slow ramp-up from its 2021 IPO debut.<\/p>\n<p>Let\u2019s get into what\u2019s happening with Rivian\u2019s new convertible stock news, why the EV maker is doing it and how the announcement sparked a big sell-off from Wall Street.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">What is Rivian planning with its stock?<\/h2>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<p>According to a new securities filing from the company on Wednesday, EV maker Rivian plans to issue $1.5 billion worth of convertible notes as a private offering to institutional buyers. The document also allowed purchasers to secure an extra $225 million.<\/p>\n<p>Rivian anticipates the bonds will mature in October 2030, from which they can either be converted to cash or shares. Rivian expects the new green bond to \u201cde-risk\u201d its R2 sports utility launch in Georgia.<\/p>\n<p>What\u2019s the big deal? It\u2019s all to do with the stock\u2019s future. Convertible notes are essentially debt that can be turned into shares at a later date, which could dilute shareholders\u2019 existing holdings. Some investors might also short the convertible notes and lock in a \u2018bond\u2019 return until the debt is converted into shares.<\/p>\n<p>It\u2019s that potential short interest, and Rivian even needs to issue convertible notes to raise more cash that\u2019s left investors concerned. It\u2019s also the second time in less than a year that Rivian has issued a green bond, having already issued a $1.3 billion one in March to launch its R2 vehicles.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">What are Rivian\u2019s latest earnings like?<\/h2>\n<p>There was another reason Rivian\u2019s stock fell so severely: the company also issued softer-than-expected guidance, sparking a sell-off among traders. The company issued its third-quarter estimates, with Rivian anticipating sales of $1.29 billion and $1.33 billion. Analyst estimates had Rivian\u2019s third-quarter sales at $1.38 billion.<\/p>\n<p>It wasn\u2019t as bad as it looks: Rivian reported better-than-expected deliveries, arriving at 15,564 for the third quarter ending September 30, which is a 23% lift from the previous quarter. Production was also up to 16,304 EVs in its Illinois facility, up from 13,992 in the second quarter.<\/p>\n<p>The company is still on track to deliver 52,000 EVs in 2023, having already raised that target back in August to 50,000. The company also believed it had cash equivalents and short-term investments of $9.1 billion, which is down from Q2\u2019s $10.2 billion.<\/p>\n<p>It\u2019s not been plain sailing for the EV maker against a difficult economic backdrop and slow adoption of fully electric cars. In August, Rivian said it had delivered 12,640 EVs in the second quarter, totalling revenue of $1.12 billion. The EV maker had a gross loss of $412 million, an operating loss of $1.29 billion and a free cash flow deficit of $1.62 billion.<\/p>\n<p>Even with improved figures in the third quarter, the missed sales estimate and the convertible bond put Wall Street on edge about Rivian\u2019s future viability on Thursday.<\/p>\n<p>Rivian\u2019s CEO, RJ Scaringe, has previously stated the business has enough cash in the bank to keep it going in the short term. \u201cThe cash balance that we have today takes us through 2025,&#8221; Scaringe said. &#8220;We will be very thoughtful and intentional on how we secure additional capital to support the growth of the R2 program.\u201d<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">What was the market reaction?<\/h2>\n<p>Wall Street was clearly aghast at the situation. Rivian\u2019s stock plummeted 23% during Thursday trading, which marked the biggest daily percentage drop in the company\u2019s share price since its market debut in 2021. The shares closed Thursday trading at 22.9%, priced at $18.27, which is the lowest stock price since July.<\/p>\n<p>Thursday\u2019s drop mostly wiped out Rivian\u2019s stock gains for the year, and the company is now up 2.85% since 2023. According to LSEG data, the current median price target from 24 analysts on Rivian shares is $30 with a Buy rating.<\/p>\n<p>EV start-ups have had a rough ride on the markets as a whole. Luxury EV sports car maker Lucid Group has fallen over 64% in value in the last 12 months, while Ford has remained flat (though it doesn\u2019t help that the legacy car maker has a huge union strike going on right now).<\/p>\n<p>Tesla, on the other hand, continues to fly despite price cuts and delivery numbers setbacks. The stock has risen 134% since the year began and is trading for $254.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">How is the broader EV market performing?<\/h2>\n<p>Rivian\u2019s third quarter estimates are an improvement over the second quarter, but the company has opted against price cuts when its competitors are doing just that. Tesla was the first to do so in the spring, cutting the price of its Model Y and Model 3 by up to 25% in the U.S. so consumers could take advantage of a new EV vehicle tax credit.<\/p>\n<p>Those price drops have extended to the European and Chinese markets, with Tesla, Ford and Volkswagen introducing bargain-basement pricing for their EVs to try and tempt buyers. In comparison, Rivian\u2019s EVs average for $80,000.<\/p>\n<p>Despite the price cut efforts, Tesla\u2019s latest delivery figures for the third quarter disappointed Wall Street. The EV maker delivered 435,059 cars globally in the third quarter, having been hampered by factory shutdowns in the last few months. The slower clip in delivery pace meant that Chinese EV maker BYD overtook Tesla in deliveries for the first time ever, having shipped 440,000 new battery EVs for the quarter ending September 30.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">The bottom line<\/h2>\n<p>Rivian\u2019s convertible green note might look like a desperate grab for cash to prop up a business haemorrhaging money to some investors or could be seen as a smart move to secure cash now before the market tightens further.<\/p>\n<p>Rivian has struggled to take off since its blockbuster IPO, with the company only producing and delivering tens of thousands of EVs rather than the hundreds of thousands needed to be profitable &#8211; because EVs are expensive.<\/p>\n<p>The company\u2019s latest earnings estimates haven\u2019t helped the stock, with Wall Street focusing on Rivian\u2019s dwindling free cash flow and missed sales target. But the quarter\u2019s numbers are still overall an improvement over Q2, which investors should remember when considering putting their money into this EV start-up.<\/p>\n<p>In short, it\u2019s not the end of the world for Rivian, but sales had better continue looking relatively strong over the next couple of quarters to allay Wall Street\u2019s concerns.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/qai\/2023\/10\/06\/rivian-convertible-stock-plan-causes-record-stock-drop-for-ev-maker\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key takeaways Rivian has confirmed it\u2019s raising a $1.5 billion convertible green note for institutional investors It\u2019s the second time the EV maker has done so in a year to raise cash Rivian\u2019s share price fell 23% in a day, a new record drop for the company since its 2021 debut Start-up EV maker Rivian [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":69470,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-69469","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Rivian Convertible Stock Plan Causes Record Stock Drop For EV Maker | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Key takeaways Rivian has confirmed it\u2019s raising a $1.5 billion convertible green note for institutional investors It\u2019s the second time the EV maker has\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=69469\" 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