Irvine, California-based Rivian has a new plan to generate over a billion dollars and it comes down to selling bonds. The automaker says that this new bond sale will fund its second-gen R2 platform launch. The announcement sent the company’s stock tumbling hard in Tuesday trading.
At the end of February, Rivian revealed that it had more than $12 billion in cash and cash equivalents as part of its Q4 earnings release. In fact, it even said that it was confident that those funds would be enough to get the company all the way through 2025. Today, it’s decided to gather more funds through the sale of $1.3 billion worth of bonds.
A Rivian spokesperson told Reuters, adding that convertible debt was the “optimal cost of capital versus selling equity at today’s levels.” With that in mind, it’s clear that the electric vehicle maker is doing everything it can think of to increase available cash, increase production, and get to profitability.
Read: Rivian Cuts Almost 500 Jobs In California To Save Cash
Earlier in the year it announced that it would cut some six percent of its employees in an effort to save money. The first of those cuts happened only days ago. CEO RJ Scaringe specifically said that the company had to focus its efforts on ramping up production and its path to profitability.
Investing more cash now in developing its second-generation R2 platform could help it be in a much better position a few years from now. As for the bonds, they’ll mature in March of 2029 and investors will then have the option to convert them to cash or into stocks.
As of this writing, the details surrounding the bonds including interest rate, initial conversion rate, and other terms haven’t been announced. After the announcement, Rivian’s stock price tumbled some 12 percent.
Notably, Rivian isn’t alone in leveraging bonds as a means of firming up its bottom line. Back in 2021, Lucid sold $1.75 billion worth of senior notes, a type of bond, to improve its cash situation. Just like Rivian, it saw a pretty steep drop off in market value immediately after announcing the sale.
