Rivian plans to sell $1.3 billion in bonds to shore up capital, shares fall

SAN FRANCISCO (Reuters) – Rivian Automotive plans to sell bonds worth $1.3 billion, it said on Monday, as weakening demand and lofty costs tighten a cash crunch around electrical vehicle makers.

Shares in Rivian fell nearly 7% in after-hours trading. Initial investors will get an option to buy an additional $200 million of the bonds for settlement 13 days after the bonds are issued, Rivian said in a statement. 

The capital from this offering will help facilitate the launch of Rivian’s smaller R2 vehicle family, a Rivian spokesperson told Reuters, adding that convertible debt was “optimal cost of capital versus selling equity at today’s levels.”

Irvine, California-based Rivian, which makes R1T electric pickup trucks and R1S SUVs, has said its cash balance will fund its operations through 2025. It reported cash and cash equivalents of $11.57 billion at the end of December, down from $13.27 billion a quarter earlier.

In an effort to cut costs, the company last month laid off 6% of its workforce.

Late last year, it shelved plans to build delivery vans in Europe with Mercedes and had earlier pushed back by a year to 2026 the planned launch of a smaller R2 vehicle family at the $5 billion plant it is building in Georgia.

Rivian, which has been losing money on every vehicle it builds, forecasts 2023 production well below analysts’ estimates as it grapples with lingering supply chain bottlenecks after narrowly missing its target last year.

Rivian said the bonds would be “green” ones, which 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.

Rivian’s bond will mature in March 2029 and investors will have the option to convert the bonds into cash or shares in the EV maker.

The interest rate, initial conversion rate and other terms of the bonds will be decided at the pricing of the offering.

(Reporting by Abhirup Roy in San Francisco and Isla Binnie in New York; Editing by Leslie Adler and Chris Reese)