Rivian (RIVN) crashes after plans to raise more than 1 billion in cash

Rivian (countryside) plans to raise $1.3 billion in cash by selling green convertible notes, although it was indicated that it had sufficient liquidity in last week’s earnings. Investors are unhappy with the move, with Rivian stock down more than 10% after Tuesday’s announcement.

Rivian is raising $1.3 billion through green bonds

According to the company’s fourth-quarter earnings release on Feb. 28, Rivian ended the quarter with more than $12 billion in cash and cash equivalents after burning through $1.4 billion during the period.

On its earnings call, the company said the following:

We remain confident that cash and cash equivalents can finance our operations until 2025.

While the EV startup isn’t in dire need of cash (right now), Rivian has a full board this year as it ramps up production of its R1 and RCV platforms while developing its next-generation R2 architecture due to arrive in 2026.

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

Rivian loses money on every vehicle it produces (about three times that amount), but that’s to be expected as the electric vehicle maker works toward full production capabilities at its Normal, Illinois, plant.

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

According to a SEC filing On Monday, Rivian is looking to improve its capital position further. Rivian has announced that it plans to raise $1.3 billion in cash through a green convertible bond.

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Traditional convertible notes can be paid off with either cash or shares, or a combination of the two, making it cheaper and easier for startups like Rivian to raise money. Meanwhile, Green Bonds offer additional benefits to investing in businesses using the money for climate-related projects that help preserve the environment.

Take Electric

Making electric cars (or any A-Z vehicle for that matter) is incredibly capital intensive. This is why Tesla was one of the first new car brands to hit the market.

Tesla has also been through its own “production hell” for those who don’t remember. However, Rivian will need to significantly improve its profitability as it moves forward to ramp up production.

New technology like the Eduro drive unit, which is built in-house, helps keep materials costs down, Rivian says. The EV maker takes what it has learned so far with the R1 series and uses it as a foundation for the R2 platform.

The next few quarters will give us a better idea of ​​how Rivian can improve its gross margins as it works to produce more vehicles at a lower cost.

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

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