Rivian Reveals US$1.5 Billion Convertible Note Sale; More Offerings to Come?

On March 6, Rivian Automotive (NASDAQ: RIVN) became the first of the cash-burning start-up electric vehicle manufacturers to raise new capital in 2023. The company announced plans to sell up to US$1.5 billion in convertible notes with a 2029 maturity date. The offering, which is open only to qualified institutional buyers, will be marketed as green notes, meaning that ESG investors may be willing to settle for less than market rates for the bonds.

Many institutional purchasers of a company’s convertible notes or bonds short some quantity of the underlying stock to hedge their investments, so Rivian’s shares could be pressured during the marketing of these securities.

Whether the US$1.5 billion planned to be raised will be the only time that Rivian is forced to access the capital market this year is debatable. For the full year 2022, Rivian reported astounding adjusted EBITDA and free cash flow deficits of US$5.2 billion and US$6.4 billion, respectively. Free cash flow is defined as operating cash flow less capital expenditures.

More ominously, Rivian anticipates its 2023 adjusted EBITDA will be around negative US$4.3 billion, and that 2023 capital spending will be in the vicinity of US$2.0 billion, implying almost the same level of cash burn in 2023 as 2022 (US$6.3 billion in 2023 versus US$6.4 billion in 2022).

RIVIAN AUTOMOTIVE, INC. —  Selected Financial Statistics

(in millions of US dollars)2023 GuidanceFull-Year 20224Q 20223Q 2022
Revenue$1,658 $663 $536 
Operating Income($6,856)($1,795)($1,724)
Operating Cash Flow($5,052)($1,446)($1,368)
Adjusted EBITDA($4,300)($5,217)($1,461)($1,307)
Capital Expenditures($2,000)($1,369)($294)($298)
Cash$11,568 $11,568 $13,272 
Debt and Convertible Preferred$1,812 $1,812 $1,761 
Shares Outstanding (millions)926 926 921 
Number of Vehicles Produced50,00024,33710,0207,363
Number of Vehicles Delivered20,3328,0546,584

By any measure, Rivian still has a fortress balance sheet thanks to the extraordinary success of its November 2021 IPO, but its ledger is not quite as secure a fortress as it once was. Rivian’s cash balance and net cash (cash net of debt) eroded to US$11.6 billion and US$9.8 billion, respectively, on December 31, 2022. A year ago, the comparable figures were US$18.1 billion and US$16.6 billion.

READ: Rivian’s Giant Cash Burn Expected To Continue Through At Least 2023

A potential offsetting positive for Rivian is recent media reports that management told employees internally it could produce more than 60,000 vehicles in 2023. If that higher throughput were to happen, Rivian would generate incremental cash flow and, perhaps more importantly, boost investor sentiment. In January 2023, Rivian announced full-year 2022 vehicle production of 24,337 units. In its 4Q 2022 earnings release dated February 28, 2023, Rivian said it expects to manufacture approximately 50,000 units in 2023.

Rivian is down 90% from its all-time high about 16 months ago, but it still does not seem cheap. Factoring in its giant cash holdings, the company’s enterprise value is about US$4 billion. That is difficult to square with a projected negative US$4.3 billion adjusted EBITDA in 2023.

Rivian Automotive, Inc. last traded at US$14.64 on the NASDAQ.

Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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