Rivian Automotive, a manufacturer of electric vehicles (EVs), has announced its plans to raise $1.3 billion in cash through the sale of convertible notes, joining the ranks of other EV makers who are trying to accumulate funds due to dwindling demand. On Tuesday, shares of Rivian dropped over 14%.
The convertible notes that Rivian plans to sell are essentially bonds that can be repaid using cash, stock, or a combination of the two. The funds will be utilized to finance the development and launch of the company’s smaller R2 series of vehicles, which is now expected to be released in 2026. Institutional investors who buy these notes will have the option of purchasing additional notes worth up to $200 million above the initial $1.3 billion.
Rivian is not in immediate need of cash since it had $12.1 billion in reserves at the end of 2022, sufficient to fund its operations until 2025. Nonetheless, the company has taken several steps to conserve cash, including laying off 6% of its workforce and delaying the R2 launch by a year. Additionally, Rivian recently announced that it expects to manufacture 50,000 vehicles in 2023, fewer than the 60,000 anticipated by Wall Street analysts. This could indicate that the demand for its expensive SUVs and pickups is not meeting the company’s expectations.
Lucid, another EV startup, has also lowered its production expectations for 2023 and intends to ramp up its marketing efforts in the coming months, implying that it, too, is experiencing fewer orders than anticipated.
Rivian raised almost $12 billion when it went public in late 2021, resulting in a substantial cash reserve that dwarfs that of most other EV startups. However, the company’s shares have declined by more than 80% since their debut.
The convertible notes will be classified as “green bonds,” indicating that they meet specific criteria that are likely to appeal to institutions willing to accept lower returns in exchange for promoting sustainable development. The notes will mature in March 2029, and the interest rate and other terms will be determined at the time of pricing.
