Rivian raises $1.three billion amid considerations about EV demand

The Rivian name is seen on one of their new electric SUV vehicles in San Diego, the United States, on December 16, 2022.

Mike Blake | Reuters

Rivian Automotive plans to raise $1.3 billion in cash through the sale of convertible debentures and join a growing list of electric vehicle manufacturers scrambling to hoard cash when demand slacks.

Rivian shares closed down over 14% on Tuesday.

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Rivian said late Monday it plans to sell the convertible bonds — bonds that can be redeemed for cash, stock or a mix of both — to fund the development and launch of its forthcoming smaller R2 car line, now expected in 2026 . The institutional investors purchasing the Notes will have the option to purchase up to $200 million in additional Notes if they wish, in addition to the initial $1.3 billion.

Rivian isn’t in an urgent liquidity crisis, at least not yet. The EV maker had $12.1 billion on tap at the end of 2022, it said during its fourth-quarter earnings presentation on Feb. 28, enough to fund its operations through 2025. But he recently took a number of measures to save cash, laying off 6% of the workforce and pushing the R2’s launch forward by a year.

Rivian also said last week that it expects to produce 50,000 vehicles in 2023, down from the roughly 60,000 Wall Street analysts had been expecting. That could be a sign that demand for its high-priced pickups and SUVs is falling short of expectations.

ClearAnother startup that makes high-priced electric vehicles also led investors to lower-than-expected production in 2023 and said it plans to ramp up its marketing in the coming months, suggesting it may be less too orders than expected.

Rivian raised nearly $12 billion when it went public in late 2021, helping it amass a cash hoard that still dwarfs most other EV startups. However, the company’s shares have lost over 80% of their value since the debut.

Rivian said the convertible bonds would qualify as “green bonds,” meaning they meet a set of criteria that tend to attract institutions willing to accept lower yields in exchange for supporting sustainable development.

The Notes mature in March 2029. The interest rate and other terms will be determined when the offer is priced.