It is difficult to drive the price of a horrible company’s stock down sharply. Trouble should be priced into its shares already. However, Rivian Automotive Inc. (NASDAQ: RIVN) was able to pull off the trick. When the electric truck maker said it would raise money, its stock promptly dropped 20%. That also puts it down 50% in the past year. (These are the 13 biggest electric vehicle business failures in American history.)
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Why Rivian Needs More Money
Rivian announced the sale of a convertible security with proceeds of $1.5 billion. It is a sign that Rivan knows it does not have enough money to survive with its current balance sheet. These bonds can be converted to cash or common stock, meaning today’s shareholders could be horribly diluted. The punishment was fair, based on the math.
Rivian’s cash burn looks like a dumpster fire. According to CNBC, “Rivian also estimated that it had cash and equivalents of $9.1 billion as of Sep. 30, down from $10.2 billion at the end of the second quarter.” It takes a special skill to lose that much money. In an SEC filing, Rivian said it posted between $1.29 billion and $1.33 billion in the September quarter. (It lost $8.2 billion in the five quarters that ended in June.) Rivian Chief Executive Robert Scaringe says its cash pile will last through 2025. What happens then?
Rivian is known for its outrageously priced vehicles, some of which approach a manufacturer’s suggested retail price of $100,000. It is up against Ford and its F-150 Lightning, Ford’s electric vehicle flagship. Ford has millions of gasoline-powered F-150 vehicles on the market, giving it a huge base to which to market the Lighting.
Tesla will come out with its Cybertruck at the end of the year. Tesla says it has a waiting list of 2 million people. Although many will not buy the truck, it is a sign of at least brisk demand.
Rivian has disappointed investors over and over again. It cannot stop itself.
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