Rivian Automotive (NASDAQ:RIVN) fell more than 5% overnight after the company said it will raise $1.3 billion in a convertible note offering. Now, shares of the company are trading more than 10% lower today.
The note is a “green bond” that comes with tax incentives for climate-related projects. An electric vehicle (EV) company, Rivian is building a $5 billion manufacturing plant in Georgia with state government help.
Here’s what RIVN stock investors should know moving forward.
RIVN Stock: Shoring Up Positions
Rivian had $11.5 billion in cash at the end of 2022 and only $1.2 billion in long-term debt. But electric vehicle startups are also out of fashion with investors. Some analysts even believe Rivian needs to find a buyer.
This company first came to prominence in 2019 after Amazon (NASDAQ:AMZN) placed an order for 100,000 electric delivery vans. Ford (NYSE:F) also invested in Rivian on the strength of its electric truck and SUV designs. But Ford has since sold most of that position.
Originally, the vans were due to be delivered by 2024. Around 1,000 vans have been delivered so far, as of late last year. Amazon has since placed an order with Stellantis (NYSE:STLA) as well, the parent company of Chrysler.
Rivian made just over 10,000 vehicles last quarter from its facility in Normal, Illinois. For 2022, however, the company’s full-year production fell just short of its 25,000 vehicle target. For 2023, the company has also set a goal of 50,000 vehicles — and told employees that it could potentially make 62,000 vehicles this year. The EV maker’s new plant in Georgia is expected to open production starting in 2024.
What Happens Next?
So, what should investors make of the new green bond news?
The $1.3 billion bond risks watering down existing shareholders. RIVN stock is unlikely to see its 2023 high close of $21.15 per share any time soon.
On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.