Rivian (RIVN) shares are sliding today as the EV-maker announces plans for a “green” debt offering.
Rivian says it intends to sell $1.3 billion worth of “green” convertible senior notes due in 2029, with the option to grant an additional $200 million worth of convertible notes to the original purchasers.
In line with Rivian’s ethos as a company (it’s a Climate Pledge signatory and was the first to say it won’t use deep-sea mining for batteries), it intends to use the capital it raises for “green” or environmental purposes.
“Rivian intends to use the net proceeds from the offering to finance, refinance, make direct investments in, in whole or in part, one or more new or recently completed… current and/or future eligible green projects,” the company said in a statement. Rivian said these projects could include activities tied to clean transportation, renewable energy, circular economy (i.e., recycling batteries/metals), energy efficiency, and pollution prevention.
Rivian said the green-note offering meets the eligibility requirements as determined by International Capital Markets Association’s “Green Bond Principles” guidelines.
In its most recent earnings report, Rivian barely reached its production goal for the year but reported an adjusted EBITDA loss of $5.22 billion. With the company forecasting another adjusted EBITDA loss of $4.3 billion for 2023, that it's seeking additional sources of funding is not surprising. Rivian reported it had cash on hand of $12.01 billion at the end of the fourth quarter and expects capital expenditures to reach $2 billion for the year. Rivian is also in the midst of developing its next factory in Georgia, where its next-generation R2 vehicles will be built. Rivian says production of that vehicle will start in 2026.
Indianapolis - Circa August 2022: Rivian R1T Pickup Truck display at a dealership. Rivian offers the R1T in Explore, Adventure and Launch models.With a long lead time until its next vehicle, Rivian’s cash situation is a key focus for analysts and investors.
“We're forecasting 2023 cash burn of $5.5B helped by working cap. RIVN guided to a 40% improvement in FCF in 2024 driven by their target of positive gross margins. We est. RIVN will need to raise financing by the end of 2024,” Wells Fargo analyst Colin Langan wrote in a note the day after Rivian’s latest earnings release predicting today’s announcement of a capital raise. Langan currently has an Equal Weight rating on the stock with an $18 price target.
With questions still remaining about how many vehicles the company can churn out in 2023, Rivian’s recent stock volatility may be a regular occurrence without more evidence of production gains and cash preservation initiatives.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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