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

Rivian ($RIVN) plans to raise $1.3 billion in cash by selling green convertibles despite having enough cash last week. Investors are not happy with the move, as Rivian shares are down more than 10% following Tuesday’s announcement.

Rivian raises $1.3 billion through green bonds

According to the company’s quarterly earnings report as of Feb. 28, Rivian ended the quarter with more than $12 billion in cash and equivalents, after consuming $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.

While the EV start-up has no pressing need for cash (at the moment), Rivian does have a full plate this year as it ramps up production of the R1 and RCV platforms while developing the next-generation R2 architecture which is scheduled to arrive in 2026. .

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

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

The company has already taken a series of measures to save money, including laying off 6% of its workforce earlier this year and cutting operating costs in the fourth quarter.

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

Traditional convertible bonds can be redeemed in cash or stock, or a combination of the two, making it cheaper and easier for start-ups like Rivian to raise money. Meanwhile, “green bonds” offer additional benefits to investments in companies that use the funds for climate-related projects that contribute to the environment.

Electrek’s Take

Building electric cars (or any vehicle for that matter) is incredibly capital intensive. That’s why Tesla was one of the first new car brands to break into the market.

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

Rivian says new technology, such as the Eduro drive unit built in-house, helps reduce material costs. The EV maker takes what it has learned so far with the R1 series and uses it as the basis for the R2 platform.

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

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