Rivian has revealed its plan to raise funds worth $1.3 billion through the sale of bonds, citing increasing expenses and reduced demand as contributors to a financial squeeze surrounding electric vehicle manufacturers. This announcement led to a drop of approximately 7% in the value of Rivian shares during after-hours trading. According to a statement by Rivian, initial investors will be given the opportunity to purchase an additional $200 million of bonds for settlement 13 days after issuance.
The funds raised through the bond sale will assist in the launch of Rivian’s smaller R2 vehicle family, as shared by a Rivian spokesperson to Reuters, while also revealing that convertible debt was the preferred capital source compared to selling equity at current prices. Rivian, headquartered in Irvine, California, produces R1T electric pickup trucks and R1S SUVs and had announced that its cash reserves could fund its operations until 2025. At the end of December, it reported cash and cash equivalents of $11.57 billion, compared to $13.27 billion in the previous quarter.
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In a bid to lower expenses, the company recently laid off 6% of its workforce. Last year, Rivian halted plans to construct delivery vans in Europe with Mercedes and pushed back the launch of its smaller R2 vehicle family by a year to 2026 at its $5 billion plant in Georgia. As Rivian has been incurring losses on each vehicle produced, its projected 2023 production falls significantly below industry experts’ predictions due to lingering bottlenecks in the supply chain.
The bonds Rivian intends to sell are categorized as “green,” giving the company the opportunity to raise debt at a lower cost from investors who are willing to accept reduced returns in exchange for supporting environmentally friendly projects. The bond is set to mature in March 2029, and investors will have the option to convert the bonds into cash or shares in the EV manufacturer. The terms of the bond, including the interest rate and initial conversion rate, will be determined during the pricing of the offering.
