Rivian is considered one of Tesla’s fiercest competitors in the USA and has been able to gradually increase its electric car deliveries in recent months. Last week, however, the announcement of the issuance of green convertible bonds caused trouble for Rivian shares. Wedbush Securities also interprets this as a bad sign.
• Rivian wants to finance further expansion with green convertible bonds
• Wedbush analyst Ives loses confidence and lowers Rivian price target
• Investors reacted sniffily and punished Rivian shares
Rivian plans to raise fresh capital through green convertible bonds. The electric car maker filed a document last week saying it would sell $1.5 billion of green convertible bonds, officially known in English as “Green Convertible Senior Notes,” to qualified institutional buyers in a private placement should be issued. These buyers also have the opportunity to purchase an additional $225 million in bonds. The notes are senior unsecured obligations and mature in October 2030. Investors can then choose whether to convert the bonds into Rivian shares or receive a cash payment.
The reason behind the convertible bond issue
For investors and analysts, the important question now arises as to the reasons for the surprising capital measure. A Rivian spokesperson explained that the offer is designed to de-risk the R2 rollout in Georgia. The current offer serves to “reduce the risk of introducing the R2 in Georgia,” as “Reuters” quotes from the statement. Rivian had already issued similar bonds with a volume of $1.3 billion in March. “Our primary goal is to maintain a conservative balance sheet,” the company spokesman continued.
Rivian continues to burn billions. However, the company, founded in 2009 by current CEO Robert “RJ” Scaringe, has significantly increased production at its Normal, Illinois, plant in recent quarters. Last quarter, deliveries were 15,564 electric cars, exceeding the average analyst consensus of 14,740 cars. The officially stated goal of delivering at least 52,000 cars in 2023 as a whole has come a little closer, as Rivian reiterated in a company announcement last week.
At the beginning of 2026, the electric car manufacturer, which is currently setting up its second production site in Georgia, also wants to expand its range and – in addition to the already available electric pick-up R1T and the electric SUV R1S – launch the first vehicles based on the R2 platform. Rivian is now relying on green bonds for the launch. According to Reuters, green bonds also enable companies to raise money on more favorable terms, as many investors would accept lower returns in exchange for supporting green projects.
While the majority of analysts and investors view this capital measure very critically, there are definitely analysts who put the issue of green convertible bonds in a positive light. For example, Ivana Delevska, CIO of Spear Invest, described the measure to Reuters as “sensible”. The market expert, whose investment company itself holds Rivian shares, viewed it as positive that they would rather “play it safe” because otherwise the financial market could become very tight.
Wedbush Securities is critical of Rivian convertible bonds – and lowers its price target
Wedbush Securities analyst Dan Ives does not share this positive opinion. Earlier this week, Ives lowered his Rivian 12-month price target from $30 to $25. For Wedbush analysts led by Ives, the bond issue is another example of the “continued execution/communication missteps” that have accompanied Rivian since its NASDAQ IPO in November 2021. “While we fully understand Rivian’s capital needs in the coming years, the stock market’s low confidence in the management team in terms of investor communication and execution is a major concern for the stock,” Wedbush said in a research note -Grade.
Nevertheless, Ives maintains a positive outlook for Rivian shares in the medium to long term. “We remain bullish on Rivian’s growth prospects and believe the company has a solid path to becoming one of the long-term winners in this EV arms race in the coming years,” 25News quotes from the study. However, Ives concludes by emphasizing that her confidence in Rivian’s growth story has taken a “significant hit.”
Investors sent Rivian plummeting after the convertible bond announcement
Apparently, not only the confidence of Wedbush analysts, but also that of investors has suffered a significant blow, as evidenced by the horrified reaction of shareholders to the convertible bond issue. On Thursday last week alone (October 5, 2023), they sent Rivian shares down a full 22.88 percent to a closing price of $18.27. The recovery movement was also rather muted in the last few trading days. At a current level of 19.37 US dollars (closing price on October 11, 2023), the Rivian share is still up 5.10 percent for the year, but is far behind its rival Tesla, whose shares are in the In the current year, we have been able to increase by a whopping 113.5 percent.
Editorial team finanzen.net
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