Shares of electric truck manufacturer, Rivian Automotive (ticker: RIVN), took a hit in premarket trading on Thursday following disappointing guidance and the company’s announcement of plans to raise additional funds.
Disappointing Guidance and Convertible Notes
Rivian recently revealed that it had exceeded expectations in terms of unit deliveries in the third quarter. However, the company’s sales projections for the current quarter fell slightly below analysts’ estimates. In an effort to raise funds, Rivian intends to issue $1.5 billion in convertible notes – a form of debt that can be converted into shares, potentially leading to dilution of current owners’ holdings.
Premium Electric-Powered Trucks at a Price
Rivian’s electric-powered trucks have been quite enticing for American buyers who desire a pickup truck that handles like a sports car. However, with an average price tag of approximately $80,000, producing these vehicles comes at a significant cost. A deep dive into Rivian’s financials shows that the company sold trucks at an average loss of $33,000 during the second quarter, resulting in a cash burn rate.
Volatile Stock Performance
Rivian’s stock has experienced notable volatility. While it has recorded a 25% increase since the beginning of this year, it remains 36% lower than it was a year ago. The company has already utilized about half of its $18 billion cash reserves. Since its successful $12 billion initial public offering in 2021, Rivian’s shares have decreased by approximately 70%.
The Path to Profitability
To counteract its current financial challenges, Rivian must focus on cost reduction and streamlining production processes. Although the company is currently facing losses, it believes these losses are necessary to stimulate growth. Rivian aims to achieve profitability from its vehicles by 2024.
It is evident that Rivian is facing an uphill battle as it navigates its way through cost optimization and production efficiency improvements. However, the company’s continued efforts to achieve profitability provide hope for future success.
