EV maker Rivian plans $1.5 billion convertible bond sale, shares fall

By Savyata Mishra and Abhirup Roy

(Reuters) -Electric-vehicle maker Rivian Automotive on Wednesday said it plans to sell convertible green bonds worth $1.5 billion and forecast quarterly revenue to rise in line with estimates.

The Irvine, California-based company’s shares fell nearly 8% in after-hours trading. Convertible bonds can be dilutive when converted into shares and are typically seen negatively by investors when issued.

Rivian’s bond will mature in October 2030 and investors will have the option to convert the bonds into cash or shares in the company, it said in a filing.

Initial investors will get an option to buy an additional $225 million of the bonds for settlement 13 days after the bonds are issued.

While the issuance is having a negative impact the stock, it was “prudent” of Rivian because the “market could get really tight”, said with Ivana Delevska, chief investment officer of Spear Invest, which holds Rivian through its Spear Alpha ETF. “You want to be safe than sorry.”

Wednesday’s plan to sell green bonds – that typically offer companies the chance to raise debt more cheaply from investors who are willing to take lower returns in exchange for supporting green projects – comes after a similar $1.3 billion bond sale in March that Rivian had said would help facilitate the launch of its smaller R2 vehicle family.

“The purpose of this offering, similar to our raise earlier this year, is to de-risk the launch of R2 in Georgia,” a Rivian spokesperson told Reuters. “Our primary goal is to maintain a conservative balance sheet.”

Rivian, like its EV rivals, has been burning through cash to boost production and keep up with market leader Tesla, which has slashed prices amid concerns of softening demand for electric vehicles in the United States.

Rivian’s cash balance as of Sept. 30 was estimated to be at $9.1 billion, down from $10.2 billion in June, it said.

The Amazon-backed startup firm beat third-quarter deliveries expectations earlier this week as it ramped up production to meet sustained demand for its pickup trucks and SUVs despite high borrowing costs for consumers.

The company expects revenue for the three months ended Sept. 30 to be between $1.29 billion and $1.33 billion, compared with nearly $540 million a year earlier. Analysts on average were expecting $1.30 billion, as per LSEG estimates.

(Reporting by Savyata Mishra in Bengaluru and Abhirup Roy in San Francisco; Editing by Maju Samuel and Stephen Coates)