EV maker Rivian’s recent bond issuance aimed to strengthen the company’s balance sheet in anticipation of potential geopolitical risks, according to CEO RJ Scaringe.
Despite having issued a $1.3 billion bond in March, Rivian decided to issue an additional $1.5 billion this month. The decision raised concerns among investors and resulted in a decline in share prices. Between October 2 and October 17, Rivian’s share price declined 16%, dropping from $23.66 to $19.90.
Scaringe explained that this capital raise was meant to provide a cushion as the company starts making significant investments in its R2 vehicle lineup. Issuing the bond will ensure that the company’s balance sheet remains stable.
The decision was not driven by concerns about Rivian’s operations.
Rivian, known for its R1S sport utility vehicles and R1T pickup trucks, plans to introduce smaller and more affordable R2 cars by 2026. The company is confident that the R2’s execution will be a success.
The bond issuance comes at a time when rising interest rates have increased borrowing costs. In addition, the Federal Reserve may maintain higher interest rates due to strong economic data and uncertainties related to the Israel-Hamas conflict.
Rivian remains focused on ramping up production to meet demand and cutting costs to mitigate cash depletion, even as the industry faces a price war triggered by Tesla.
While Rivian exceeded expectations for third-quarter deliveries, it did not revise its full-year target of 52,000 vehicles. According to Reuters, Scaringe refrained from commenting on the production target until the company announces its results next month.
As Rivian reassures skittish investors about the bond issue, it’s continuing to sell each of its EVs at a substantial loss. However, Rivian is much closer to profitability than it was at the start of the year.
InsideEVs reports that Rivian is currently losing over $33,000 per vehicle sold. However, in the first quarter of 2023, Rivian was losing over $67,000 per vehicle.
As of September 30, Rivian’s cash balance was estimated to be $9.1 billion, down from $10.2 billion in June.
Image Source: Tony Denaro, https://shorturl.at/bEV19
