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Rivian (RIVN) crashes after announcing plans to raise over a billion in cash

Rivian ($RIVN) plans to raise $1.3 billion in cash by selling green convertible notes, despite indicating it had sufficient cash in last week’s earnings. Investors are not pleased with the move with Rivian stock slipping over 10% following Tuesday’s announcement.

Rivian raises $1.3 billion via green bonds

According to the company’s Q4 earnings release on February 28, Rivian ended the quarter with over $12 billion in cash and equivalents after burning through $1.4 billion during the period.

The company said on its earnings call that followed:

We remain confident that our cash and cash equivalents can fund our operations through 2025.

Although the EV start-up isn’t in desperate need of cash (right now), Rivian does have a full plate this year as it ramps production of the R1 and RCV platforms while developing the next-generation R2 architecture slated to arrive in 2026.

Meanwhile, CEO RJ Scaringe says “equally important to ramping production” is Rivian’s drive toward profitability.

Rivian is losing money on each vehicle it produces (about three times as much), but this is to be expected as the EV maker works toward full production capabilities at its Normal, Illinois, factory.

The company has already made a series of moves to conserve cash, including laying off 6% of its workforce earlier this year and reducing operating costs in the fourth quarter.

According to an SEC filing on Monday, Rivian is looking to improve its capital situation further. Rivian announced it was planning to raise $1.3 billion in cash through green convertible senior notes.

Traditional convertible notes can be paid back in either cash or stock, or a mix of both, making it cheaper and simpler for start-ups like Rivian to raise funds. Meanwhile, “green bonds” offer additional benefits for investing in businesses using the funds for climate-related projects that help with the environment.

Electrek’s Take

Building electric cars (or any vehicle from the ground up for that matter) is incredibly capital-intensive. That’s why Tesla was one of the first new auto brands to break through the market.

Top comment by CMG30

Liked by 24 people

Rivian should not be talking about anything other than spiking production of the truck. They need to get it profitable ASAP and the way to do that is through volume. Dividing resources through additional models and things like second factories is not helpful. Once sufficient volume and profitability in the R1T is accomplished, only then does a startup have the leeway to work on other things.

Ramping production is a learning process and attempting to ramp multiple things simultaneously, just means making the same mistakes in multiple places.

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Tesla also went through its own “production hell” for those that don’t remember. That being said, Rivian will need to improve its profitability considerably going forward as it ramps production.

Rivian says new technology like the Eduro drive unit, built in-house, is helping drive down material costs. The EV maker is taking what it has learned so far with the R1 series and using it as the foundation for the R2 platform.

The next few quarters will give us a better idea of how Rivian is improving its gross margins as it works to produce more cars at a lower cost.

Rivian said it was aiming to build 50,000 vehicles this year, although an internal meeting suggested it could be around 62,000.

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Avatar for Peter Johnson Peter Johnson

Peter Johnson is covering the auto industry’s step-by-step transformation to electric vehicles. He is an experienced investor, financial writer, and EV enthusiast. His enthusiasm for electric vehicles, primarily Tesla, is a significant reason he pursued a career in investments. If he isn’t telling you about his latest 10K findings, you can find him enjoying the outdoors or exercising