Rivian Automotive said on Monday that it has plans to sell bonds with a total value of $1.3 billion. This comes at a time when the market for electrical vehicles is experiencing a liquidity constraint due to falling demand and rising production costs.
In trading that took place beyond regular market hours, shares of Rivian plummeted by roughly 7%. According to a statement released by Rivian, initial investors will be given the opportunity to purchase an additional two hundred million dollars’ worth of the bonds for settlement thirteen days after the bonds are issued.
A representative for Rivian told Reuters that the money raised from this sale will help make it easier for the company to launch its R2 family of smaller vehicles. The spokesperson also said that convertible debt was the “best cost of capital vs issuing shares at today’s prices.”
Rivian, headquartered in Irvine, California, produces R1T electric pickup trucks and R1S electric SUVs. The company has stated that its cash balance will be sufficient to sustain its operations until the year 2025. At the end of December, it reported having cash and cash equivalents at $11.57 billion, which is less than the $13.27 billion it had reported having a quarter earlier.
The corporation fired 6% of its workers a month ago as part of an effort to reduce operating expenses. Late in the year before last, it decided to abandon plans to manufacture delivery vans in Europe in partnership with Mercedes. Earlier, it had pushed back by a year to the year 2026 the launch of a smaller R2 vehicle family that was supposed to be produced at the $5 billion plant that it was building in Georgia.
Rivian, which expects 2023 output significantly below the projections of industry analysts as it continues to struggle with persisting supply chain constraints after coming perilously close to missing its objective last year, has been losing money on every vehicle it has manufactured.
Rivian stated that the bonds will be “green” ones, which allow businesses the opportunity to raise finance at a lesser cost from investors who are ready to accept lower returns in exchange for supporting environmentally friendly projects.
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At the time of the bond’s maturity in March 2029, investors will have the option of converting their holdings in Rivian into either cash or shares of the electric vehicle manufacturer. Throughout the process of pricing the offering, decisions will be made on the interest rate, initial conversion rate, and other terms of the bonds.
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