Due To Growing Demand Concerns, Rivian Shares Fall As It Seeks To Raise $1.3 Billion

As demand for EVs dwindles, Rivian Automotive wants to raise $1.3 billion in cash through the sale of convertible bonds, joining a long number of EV manufacturers who are stockpiling cash.

Early on Tuesday, shares of Rivian were down about 11%.

The launch of Rivian's future smaller R2 series of cars, now anticipated in 2026, will be financed in part by the sale of convertible notes, bonds that can be repaid with cash, stock, or a combination of the two. Rivian announced its plans to sell the notes late Monday. The investment banks purchasing the bonds will have the choice to purchase an additional $1.3 billion worth of notes, up to a maximum of $200 million, if they so desire.

At least not yet, Rivian does not have a severe cash shortage. The EV manufacturer stated at its fourth-quarter results presentation on February 28 that it has $12.1 billion on cash as of the end of 2022, which was enough to support its operations through 2025. But, it has recently taken a number of steps to save money, including letting go of 6% of its workers and delaying the introduction of R2 by a year.

Moreover, Rivian announced last week that it would produce 50,000 vehicles instead of the 60,000 that Wall Street experts had predicted in 2023. That might indicate that there is less demand than expected for its expensive pickups and SUVs.

Another high-priced electric vehicle startup, Lucid, also told investors that production would be lower than anticipated in 2023 and that it planned to increase marketing efforts in the coming months, which may indicate that it is also receiving fewer orders than anticipated.

When Rivian went public in late 2021, it raised about $12 billion, which enabled it to establish a cash reserve that still much exceeds that of the majority of other EV businesses. Yet, since the company's inception, the value of its shares has decreased by more than 80%.

The convertible notes, according to Rivian, will meet the requirements to be classified as "green bonds," which attracts institutions who are okay with lesser returns in exchange for promoting sustainable development.

A price will be set when the offering is priced. The notes will mature in March 2029.