Rivian (NASDAQ:RIVN) fell about 9% overnight after filing for a $1.5 billion convertible note offering.
The offering wiped out an equal-sized gain in trading on Oct. 4. That came after Rivian beat estimates on third-quarter deliveries. CEO RJ Scaringe also said he saw a “very clear” set of steps toward profitability in a CNBC interview.
RIVN Stock: Rivian Wants Cash
Rivian is up 24% in 2023, even with the recent volatility. Part of this is due to the fact that Rivian is thought to be a winner in the United Auto Workers strike thanks to a non-union workforce.
On the other hand, A Wall Street Journal report said Rivian was losing billions trying to build the “ultimate pick-up” at its current plant in Normal, Illinois. The company also faces sexual harassment suits from its operations in Normal.
News of the “green” bond, which has a lower yield than other bonds, caught investors off-side because Rivian didn’t seem to be in immediate need of cash. A convertible bond will water down the stake held by current stockholders if it’s converted into equity.
Rivian had $9.1 billion in cash as of Sept. 30, down just $1.1 billion from June. The company also said it more than doubled its revenue from a year ago, to roughly $1.3 billion from $540 million.
A spokesman said the aim of the bond is to “de-risk” the costs of its coming factory in Georgia. The plant is being built with extensive aid from the state government. TipRanks lists 21 analysts following Rivian, with 13 buys and just one sell.
Sentiment on Stocktwits has been high, with high message volume. But recent notes reflect the high volatility of the shares, with bulls calling the convertible note news a “short trap” and bears predicting bankruptcy.
What Happens Next?
The story on Rivian will be told after its Georgia factory, designed to produce lower-cost cars, opens in 2026. The whole point of the note offering is to get there.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
