IRVINE, Calif. — Rivian Automotive, Inc. (NASDAQ:RIVN) shares plummeted nearly 23% on Thursday after the electric vehicle maker announced a debt offering. At least one analyst thought it was an overreaction.
What Happened: Commenting on the predicament, Future Fund Managing Partner Gary Black said the selling seems “way overdone.” The conversion of debt into equity may not dilute equity capital by much, the analyst said.
Given Rivian’s equity capital is $17.3 billion, even if 100% of the new debt issue is converted, assuming a conversion price at 30% above the current stock price, maximum dilution would be only about 7%, he said.
“Everyone expected more equity in 2024, so RIVN is being penalized for announcing new capital 1 year early,” said Black.
The company’s third-quarter preliminary revenue estimate of $1.29 billion to $1.33 billion is in line with the consensus and the $9.1 billion cash guidance at the end of the third quarter is above expectations, he noted.
“$RIVN selling today seems way overdone (-23%) on plans to sell $1.5B convertible debt due 2030. Current equity $17.3B so even if 100% of new debt issue is converted assuming a normal conversion price at 30% above current price, max dilution would be ~7%. Everyone expected more…,” said Gary Black in post on X.
Skeptics Raise Concerns: Not all share Black’s view. CNBC Mad Money host Jim Cramer expressed worries about Rivian.
Speaking on CNBC’s “Squawk On The Street”, Cramer made the following remarks “I happen to think that management here is very good, but I am very worried that when you do a convertible like that and the stock goes down like this, it means there’s less faith than there was in Elon Musk and Tesla after year two,” said Cramer.
A Wall Street Journal report published on Monday said Rivian lost $33,000 per car it manufactured in the third quarter, while the average ASP of its EV is about $80,000.
Rivian ended Thursday’s session down 22.88% to $18.27, according to Zenger News Pro data.
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