Rivian Automotive Inc, the electric vehicle maker backed by Amazon.com Inc (NASDAQ:AMZN) and Ford Motor Co (NYSE:F), saw its shares drop by nearly 23% on Thursday, the biggest daily percentage decline since its blockbuster initial public offering last week. The stock fell to $107.77, down from its peak of $179.73 on Monday, after the company announced plans to issue $1.5 billion of convertible senior notes due 2028 in a private offering to institutional investors1.
The convertible bond offering, which gives investors the option to exchange their debt for equity at a later date, is seen as a way for Rivian to raise more capital to fund its ambitious expansion plans. The company aims to deliver 100,000 electric delivery vans to Amazon by 2030, as well as ramp up production of its R1T pickup truck and R1S SUV for consumers2.
However, some analysts and investors are concerned that the bond offering could dilute Rivian’s existing shareholders and signal that the company is burning through cash faster than expected. Rivian reported a net loss of $1.2 billion in the first nine months of 2021, while generating only $1 million in revenue3. The company also faces intense competition from other EV makers, such as Tesla Inc (NASDAQ:TSLA), which has a much larger market share and a loyal customer base.
Rivian’s market valuation, which reached as high as $157 billion on Monday, surpassing that of General Motors Co (NYSE:GM) and Volkswagen AG (DE:VOWG_p), has been widely seen as inflated and unsustainable by many analysts and investors. The company’s IPO was one of the most anticipated and successful in U.S. history, raising $11.9 billion and attracting strong demand from retail and institutional investors. However, some analysts have warned that Rivian’s stock price could face significant volatility and downward pressure in the coming weeks and months, as the company tries to live up to its lofty expectations and justify its premium valuation.