Rivian Automotive plans to raise $1.3 billion in cash via a sale of convertible notes, joining a growing list of EV makers scrambling to hoard cash as demand falters.
Shares of Rivian closed down over 14% on Tuesday.
Rivian said late Monday it plans to sell the convertible notes — bonds that can be paid back with cash, stock or a mix of the two — to help fund the development and launch of its upcoming smaller R2 series of vehicles, now expected in 2026. The institutional investors purchasing the notes will have the option to buy additional notes worth up to $200 million, if they choose, above the initial $1.3 billion.
Rivian isn’t in an urgent cash crunch, at least not yet. The EV maker had $12.1 billion on hand as of the end of 2022, it said during its fourth-quarter earnings presentation Feb. 28, enough to fund its operations through 2025. But it recently made a series of moves to conserve cash, laying off 6% of its workforce and pushing the R2 launch out a year.
Rivian also said last week that it expects to produce 50,000 vehicles in 2023, fewer than the roughly 60,000 that Wall Street analysts had expected. That may be a sign that demand for its high-priced pickups and SUVs is falling short of its expectations.
Lucid, another startup making high-priced electric vehicles, also guided investors to lower-than-expected production in 2023 and said that it plans to ramp up its marketing in coming months, suggesting that it too is seeing fewer orders than expected.
Rivian raised nearly $12 billion when it went public in late 2021, helping it amass a cash hoard that still dwarfs that of most other EV startups. The company’s shares have lost over 80% of their value since the debut, though.
Rivian said the convertible notes will qualify as “green bonds,” meaning they meet a set of criteria that tends to attract institutions willing to accept lower returns in exchange for supporting sustainable development.
The notes will mature in March 2029. The interest rate and other terms will be decided when the offering is priced.