By Chibuike Oguh and Abhirup Roy
NEW YORK (Reuters) -Shares of Rivian Automotive Inc fell by nearly 23% on Thursday, the biggest daily percentage decline since their debut in 2021, after the electric vehicle maker unveiled plans to issue $1.5 billion worth of convertible green bonds.
Irvine, California-based Rivian expects the bonds, which mature in October 2030 and can be converted to either cash or its shares, will help it to “de-risk” the launch of its R2 sports utility vehicle in Georgia, a company spokesperson told Reuters on Wednesday.
It is the second time in less than a year that Rivian is issuing such a green bond, which raises capital from investors seeking to back climate-focused projects. The company had issued a $1.3 billion convertible green bond in March to support the launch of its smaller R2 vehicle family.
Rivian’s shares fell by 22.9% to close at $18.27, a three-month low. The stock, which is down about 1% year-to-date, has now dropped 77% from its initial public offering price of $78 in November 2021.
“The raise came earlier than expected,” said Elliot Johnson, chief investment officer at Evolve ETFs, which manages over $5.2 billion in assets, including investments in EV startups such as Rivian.
“So, shipping the same number of cars, earnings are in line, they’re raising cash earlier than people thought and the cash flow could be dilutive – I think that’s a concern because it’s still seen as a speculative business,” Johnson added.
Rivian, which is backed by e-commerce giant Amazon, has been burning through cash to ramp up production and keep up with market leader Tesla Inc, which has slashed prices. The company beat estimates in the third quarter by producing 16,304 vehicles and delivering 15,564 vehicles to customers.
It said on Monday it was on track to deliver 52,000 vehicles this year, disappointing many investors and analysts, who expected the company to raise its production target.
Rivian said on Wednesday it expects third-quarter revenue of up to $1.33 billion, more than double from a year earlier and in line with analyst estimates, according to LSEG data.
As of Sept. 30, Rivian had about $9.1 billion in cash on its balance sheet, down from $10.2 billion in June. In August, Rivian Chief Executive Robert Scaringe said it had enough money to last it through 2025 as it keeps a lid on costs.
Rivian currently burns about $1 billion per quarter, with profitability nowhere in sight, and the company’s new manufacturing facility in Atlanta will be expensive, said CFRA Research analyst Garrett Nelson, who reiterated his “sell” rating on the EV maker’s shares with a $15 price target.
“We think the announcement shatters one of the key talking points of the bulls, namely that the company has plenty of cash and liquidity, so its near-term capital needs are low and it’s “the best house on a bad block” among upstart EV manufacturers,” Nelson wrote in an investor note.
Some investors said it was prudent to issue the bonds now, even if it did not need the funds immediately, as the market could get tighter.
The current median price target for the 24 analysts covering Rivian’s shares is $30, with a “buy” recommendation, LSEG data showed.
(Reporting by Chibuike Oguh in New York and Abhirup Roy in San Francisco; Editing by Lance Tupper, Alexandra Hudson, Diane Craft and David Gregorio)