Rivian Automotive's Convertible Debt Offering Shakes EV Market
October 6, 2023
Rivian Automotive (RIVN), a notable name in the electric vehicle (EV) sector, recently disclosed its plans to issue $1.5 billion worth of convertible green bonds, causing quite a stir in the financial world. This decision led to a significant drop in RIVN stock and prompted a ripple of concern across the broader EV market.
Details on Rivian's Financial Decision
Rivian intended to offer these senior green convertible notes due in 2030. The bond price was set at approximately $23.29 a share, representing a 27.5% premium to the closing price from the day prior to the announcement. The funds raised from this venture are earmarked to "finance, refinance, or make direct investments in" green projects.
This move follows Rivian's report of a preliminary third-quarter revenue ranging between $1.29 billion and $1.33 billion, aligning with the general consensus. While the California-based EV manufacturer had a stock dive of nearly 23%, hitting a three-month low, it still remains committed to its green initiatives.
Reactions and Implications
The offering led to a significant drop in Rivian's share prices, marking the most considerable daily percentage decline since its market debut in 2021. The stocks plunged 22.9%, settling at a three-month low of $18.27, representing a 77% decline from its initial public offering price of $78 in November 2021.
Elliot Johnson, Chief Investment Officer at Evolve ETFs, commented on the early raise, highlighting concerns regarding the speculative nature of Rivian's business. The EV company is expected to utilize these funds to "de-risk" the launch of its R2 sports utility vehicle in Georgia. This isn't Rivian's first rodeo with green bonds; they previously issued a $1.3 billion convertible green bond in March to support their R2 vehicle family launch.
The Broader EV Market Reaction
Lucid Motors, another luxury EV startup, also experienced stock fluctuations, seeing its shares plummet as it introduced a new, more affordable version of its Lucid Air sedan. In contrast, Tesla made headlines by slashing prices of their Model S sedan and Model X SUV multiple times, indicating attempts to bolster demand for these luxury EVs.
Rivian Automotive's decision to issue $1.5 billion in convertible green bonds underscores the EV industry's dynamic and evolving nature. As Rivian navigates this financial move, it offers a window into EV manufacturers' challenges and opportunities in an ever-competitive market. The industry will keenly watch Rivian's next steps, especially its upcoming Q3 earnings report slated for November 7.
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