Rivian Automotive Inc.’s up-and-down stock performance since going public in late 2021 took another turn earlier this month, when the electric vehicle maker announced plans to sell $1.5 billion in bonds.
The news sent the company’s shares (Nasdaq: RIVN) tumbling roughly 20% amid concern over the electric vehicle maker’s financial position.
Despite the hit, Rivian still counts a roughly $16 billion valuation, making it Orange County’s third most-valuable public company.
The bond sale announcement came about half a year after the Irvine-based company announced a similar, $1.3 billion capital raise, when the company said it had enough cash to last through 2025.
CEO RJ Scaringe last week moved to ease investor concerns over the company’s fundraising, noting the bond issuances are not a reflection of the company’s operations.
Scaringe told Reuters the capital raise will serve as a buffer for the company as borrowing money grows costlier, and as the company looks to ramp up its investments to build out its fleet, specifically its upcoming compact SUV, dubbed the R2.
“I would not say this is any reflection of the degree of confidence we have for R2 both in terms of execution and in terms of our cost structure,” Scaringe told Reuters.
“We don’t control the macro-economic environment, we cannot control political conflict, and those are real risks that exist not just specific to Rivian. That’s a risk to our capital markets and the liquidity of those capital markets.”
Going Green
Rivian is offering a relatively low rate of 3.625% for its “green” convertible bonds due in 2030. The yields on Bloomberg’s U.S. corporate indices range from 5.71% to 6.63%.
Green bonds can be tax exempt when issued by federally qualified organizations.
Rivian said it intends to use the proceeds for projects eligible under the guidelines of the International Capital Markets Association’s “Green Bond Principles, 2021,” which is dedicated “to support issuers in financing environmentally sound and sustainable projects.”
EV Doubts
The bond issuance comes at a time when the pace of electric vehicle sales is slowing, the Wall Street Journal reported on Oct. 15, pointing out fewer customers are willing to pay premiums for them; unsold inventory is starting to pile up for some brands and manufacturers are shifting resources to other vehicles.
EV sales are still up over 50% year-over-year through September, the report said.
In recent months, larger rival Tesla Inc. (Nasdaq: TSLA) surprised investors when it slashed prices on its Model 3 and Model Y vehicles. In early October, it reported the delivery of 435,059 vehicles during the third quarter, below expectations and down from the second quarter.
Tesla last week reported worse-than-expected revenue and earnings.
Rivian said it’s on schedule to reach its goal to make 52,000 vehicles this year, reporting it produced 16,304 vehicles and delivered 15,564 vehicles in the third quarter.
This move follows its second quarter when the company exceeded analysts’ expectations, producing 13,992 vehicles, up nearly 50% from the quarter prior.
Rivian is Orange County’s fastest-growing public company, according to Business Journal research, with revenue surging more than 5,000% in the past two years to $3 billion for the year ended June 30 (see list, page 30).
Fleet Growth
Rivian’s 2021 IPO raised nearly $13.7 billion in proceeds for the company, making it the biggest IPO in the country since 2014.
After seeing its market cap top $100 billion for a short period after the IPO, the company’s valuation has typically been in the $20 billion range for much of 2023, with frequent fluctuations in its stock price, as the company worked to get a handle on its manufacturing and supply chain operations while ramping up vehicle production.
Wall Street has questioned whether the company is burning through too much cash, including $5 billion in 2022 on top of $2.6 billion in 2021. In the most recent second quarter, it reported a negative cash flow of $1.6 billion.
It reported $10.2 billion in cash and equivalents as of June 30, down from $11.6 billion on Dec. 31.
The company’s second-quarter report said it’s quickly improving on conserving cash, pointing out it has improved gross profit per vehicle of $35,000 versus the first quarter, “driven by ramping production, material cost reduction and increased revenue per vehicle.”
Next Generation
Rivian is planning to widen its offerings with its next-generation R2 platform vehicles.
The R2 vehicles, expected to be a compact SUV, will be a smaller and more affordable alternative to the rest of Rivian’s lineup. Its launch was delayed a year to 2026 as the company worked on improving its balance sheet.
Rivian currently sells the R1T pickup truck and the R1S SUV with prices starting at $73,000 and $78,000, respectively.
The RIT is soon to be rivaled by Tesla’s long-awaited Cybertruck, projected to enter mass production in 2024. Tesla CEO Elon Musk last week cautioned investors about the timing.
“I just want to temper expectations for Cybertruck,” Musk, the world’s richest person, said. “It will take a year to 18 months before it is a significant positive cashflow contributor.”
Rivian is seen as one of the biggest potential EV competitors to Tesla, the world’s most valuable automaker with a $770 billion market cap as of last week.
Scaringe has brushed aside concerns about the competition that his company faces with the Cybertruck, saying there’s little customer overlap.
Electric Delivery Vans
Rivian also counts a growing commercial van business line.
Amazon (Nasdaq: AMZN) recently announced it has doubled its fleet of electric delivery vans made in partnership with Rivian.
Amazon, which is a stakeholder in Rivian, began rolling out the electric delivery vans in the U.S. last summer and has now expanded to 10,000 vans.
The e-commerce giant aims to have 100,000 delivery vans on the road by 2030 as part of its climate pledge founded in 2019.
