Rivian (RIVN) shares experienced a sharp 17% drop in early Thursday trading, triggered by investor concerns following the announcement of a convertible bond offering. After closing at $23.69 on Wednesday, RIVN stock is now trading at around $19.65 on Thursday morning. This week has been quite a rollercoaster for Rivian shareholders, with the electric vehicle (EV) manufacturer, renowned for its pickup trucks, initially surging 9.2% on Wednesday but subsequently plummeting 9% in the post-market session following the unveiling of a $1.5 billion convertible debt offering.
These sales give debt investors the option to convert their debt into equity, which increases the risk of dilution. Rivian’s stock is falling along with the rest of the market as of early Wednesday, with the NASDAQ Composite leading the way with a 0.6% decrease.
The convertible bond sale may raise an additional $225 million, according to reports about Rivian’s shares. This situation is not unexpected because the market often views businesses that issue convertible bonds adversely, much like it does when they issue new shares. Notably, the share price of Chinese EV automaker Nio fell 17% after it raised $1 billion through convertible bonds two weeks ago.
With an opportunity for early buyers to buy up to an additional $225 million in convertible notes within 13 days following the initial sale, Rivian is initially offering $1.5 billion in convertible bonds expiring in October 2030.
Market Cap Outlook
Based on the closing market capitalization as of Wednesday, if the entire $1.725 billion in bonds were to be converted into shares at a later time, this move may potentially lower stockholders’ value by about 7.7%. It’s important to keep in mind, though, that by the time of conversion, market conditions could have changed, making the real dilution more or less significant.
The notes may be redeemed in whole or in part for cash at any point between October 20, 2027, and the twentieth scheduled trading day immediately prior to the maturity date, according to a statement from Rivian. This redemption is subject to the common stock of Rivian’s last reported sale exceeding 130% of the conversion price for a predetermined period of time.
It’s important to note that these bonds’ conversion price and coupon rate have not yet been determined. In contrast, Nio recently released seven-year bonds with a coupon rate of 4.625% and six-year convertible bonds with a coupon rate of 3.875%. It is predicted that Rivian may need to offer higher interest rates than Nio when determining these bond terms due to the recent rise in US Treasury yields over the past two weeks.
In the Rivian Stock News, Rivian reported a stunning 140% rise in third-quarter deliveries over the same period last year on Monday. They delivered 15,564 vehicles in Q3, more than the predicted 14,900, exceeding expectations. Rivian produced 16,304 automobiles at their factory in Normal, Illinois, during the third quarter, putting them on track to reach their 52,000 vehicle production target for 2023.
Competitor Outlook
Concerning Nio, is a Chinese electric car company with its headquarters in Shanghai. The company, which was formerly known as NextEV, changed its name to Nio in 2017. Nio is a publicly traded company that trades under the ticker NIO on the NYSE and 9866 on the HKEX in Hong Kong. Nio, a company founded in 2014, made its initial public offering in September 2020 for a total of $1.8 billion. The CEO and co-founder of the corporation, William (Bin) Li, together with President Lihong Qin, are both well-known names in Chinese business.
In Rivian Stock News, With its distinctive products and extensive global reach, Nio distinguishes itself from other electric vehicle producers. Please feel free to ask any other questions you may have regarding Nio or its vehicles.
