EV investors who bought Rivian (RIVN) at $14 in June should have sold the stock after it doubled to $28 the next month. Shares lost 22% in value last week.
Rivian pushed ahead with its capital expansion plans. It will need $1.5 billion to cover costs. The firm priced its $1.5 billion green convertible senior notes. They are due in 2030 and will pay 3.625%. Initial purchases have a 13-day option to buy another massive $225 million principal amount of notes.
Shareholders face dilution if the debt converts to $23.29. It must trade at 130%, or at $30.28, usually for 20 trading days preceding a quarter-end, for the conversion event. This key information failed to calm investors.
Rivian, before the debt sale, had a debt/equity of 0.26 times. It can afford to raise debt. However, EV demand is questionable. Tesla is cutting prices, which increases competition for Rivian. In addition, Tesla’s cyber truck is an alternative to Rivian’s product.
Traders could speculate on RIVN stock bouncing back. The company is not broken like VinFast Auto (VFS), Fisker (FSR), or Lucid (LCID). Short-selling volumes are high against Rivian. The short float is 13%.