Shares of electric vehicle (EV) maker Rivian Automotive (NASDAQ:RIVN) fell about 8% in Wednesday’s extended trading session after the company announced plans to issue $1.5 billion of convertible debt. The news of convertible offerings often triggers concerns among investors, as these offerings can cause further equity dilution for existing shareholders by increasing the number of outstanding shares when converted.
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Rivian Plans to Raise Additional Capital
Rivian intends to offer $1.5 billion of green convertible senior notes due 2030 in a private offering to institutional buyers. Through this green bond offering, Rivian wants to allocate an amount equal to the net proceeds to finance or refinance one or more existing and/or future eligible green projects. The company would also grant the initial purchasers an option to buy an additional $225 million of notes.
Like other EV players, Rivian has been investing heavily to boost production. Based on preliminary estimates provided by the company on Wednesday, the company expects to end Q3 2023 with cash, cash equivalents, and short-term investments of $9.1 billion, down from $10.2 billion as of the end of Q2 2023.
Further, Rivian expects Q3 2023 revenue in the range of $1.29 billion to $1.33 billion compared to $0.54 billion in the prior-year quarter. Earlier this week, Rivian, which manufactures R1T pickup trucks and R1S SUVs, reported Q3 deliveries of 15,564 vehicles, reflecting more than 136% year-over-year growth. The company said that it is on track to produce 52,000 vehicles this year.
Is Rivian a Good Stock to Buy?
On Tuesday, Truist Financial analyst Jordan Levy reiterated a Buy rating on RIVN stock with a price target of $30 following the company’s Q3 production and delivery data. The analyst noted that the tighter gap between production and deliveries is a “clear demonstration” of solid demand for Rivian’s R1 pickup trucks and electric delivery vans (EDVs).
Wall Street has a Moderate Buy consensus rating on Rivian stock based on 13 Buys, seven Holds, and one Sell. The average price target of $28.57 implies 20.6% upside.
