Rivian’s Wreckage

Rivian Inc. (NASDAQ: RIVN) battered investors again. This time it was a bond issue, which dropped the stock to a 52-week low. The electric vehicle (EV) maker said the bond was a “green bond.” It did not matter. The decision hurt common shareholders. (Click here for the 13 biggest electric vehicle business failures in American history.)

After the announcement, the stock declined by 15% to $14.64. This means the stock is down almost 70% from its 52-week high. Its market cap is much too high at $14 billion. Based on its performance, it should be half that, at best.

Barron’s reported, “Rivian is raising more cash. Investors aren’t too pleased. Monday evening, the EV maker announced plans to raise about $1.3 billion in green convertible senior notes that will mature in 2029.” The debt follows the rules of green bond purchases. This means debt that includes “expenditures relating to, investments in, financings of and/or acquisitions of one or more of the following: (i) clean transportation, (ii) renewable energy, (iii) circular economy, (iv) energy efficiency and (v) pollution prevention and control.” Rivian needs the money.

Last year, Rivian produced only 24,337 trucks. The company lost $6.7 billion on revenue of $1.7 billion. The year ended with almost $12 billion in the bank, which may not take it to profitability.

Rivian is up against such popular brands as Ford’s F-150 Lightning and electric versions of Chevy’s Silverado and the Ram. These are usually the three top-selling vehicles in America, which gives their EV products a huge head start. Moreover, Tesla is expected to have a pickup in the market in about a year.

To make matters worse, the EV market is in the midst of a price war brought on by aggressive price cuts by Tesla. This will compress the margins of every company in the sector. As a money-losing enterprise, Rivian cannot afford this trend.

These headwinds and the cost of its bonds to investors are too much pressure on Rivian to escape a terrible fate.

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