Rivian to raise $1.3B from sale of bonds. Premature?

[Donald Stanfield]

I plan on dropping some money on Rivian today. The whole market is tight right now, and the economic news overall is down. I don't own any Rivian stock yet, but right now seems like a great time to buy. I don't agree that the leadership or the earnings calls are extremely negative I just think the street is really bearish on Rivian.

I don't know if that's because it's a bad investment or some hedge funds just have it out for Rivian right now. Personally I think it's a good buy, but I'm by no means a financial professional and you shouldn't take my advice but instead make your own decisions.

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[Zoidz]

As much as I love my truck and have been rooting for this company, they're really starting to piss me off with the decisions they make. They have at least 100,000 back orders. That's $8 billion. BUILD VEHICLES!
...

They say 50,000 vehicles to be built, stock tanks. Then they change it to 62,000, rebounds a little. Then announce another recall. Then say they have plenty of cash, only to reverse course AGAIN. It's three steps back for every step forward they take. Just horrible how they're handling being a public company.

They seem to be building as fast as they can. Supply constraints and labor availability is an ongoing issue - I see it in my non-engineering business and in many customers and suppliers in my engineering business. The struggle is real.

Wall Street is down across the board and sour on EV. What I see is Rivian performing to their S1 goals and getting punished for not meeting ANAL-ysts expectations. Analysts can be out of touch in the best of markets, not sure how the analysts think they know so much about Rivian (or any other business) in this constrained labor market with the Fed hell bent on controlling inflation by squeezing until unemployment goes up. IMO, in a labor constrained market, the Fed is taking the wrong approach, especially with what they are indicating moving forward. Curb inflation by cutting back Government spending. Forcing unemployment in a labor constrained market is going to force some companies out of business.

 

[Tahoe Man]

Wall Street is just repricing EV companies from truly mania proportions to something more realistic. You know the Fed is rising rates after all???

Go back and read the threads from a year, year and a half ago here. Everyone was so giddy and goofy, it's like they searching everywhere to find that tulip that was suppose to blossom them into a new wealthy lifestyle coupled with some dreamlike vehicle.

I wanted to see Rivian do well, but also realized starting a new automaker that prospers from scratch is nearly impossible, even when things go well. I hedge myself with a extremely small purchase at $25 and another at $19. I thought $19 selloff was the capitulation phase, obviously that was wrong as Rivian is getting valued less than that. The Wall Street phrase trying to catch a falling knife is real.

 

[CascadianApe]

I've worked with engineers who attended GM Institute ( now Kettering) who had paid work experience in real companies as undergrads. I compare their back ground to RJ.

I sometimes wonder if Rivian was primarily constructed for the early investors to make their return at the IPO.

Musk wasn't qualified either of course. But a freak like Musk is probably a once in a century event. Plus Musk had a long runway to make stupid and harmful decisions and still have time to figure out how to run the company. The myth that Tesla was a great manufacturers before the last few years was truly bizarre.

On the positive side most ultimately successful public companies go through early turmoil. Of course all the failures do too.

Tesla also came about when capital was much much cheaper. Tesla is lightning in a bottle and so is Elon. Elon is manic and crazy, but he pushes his people in a different way. The way RJ pushes is passive aggressive and non transparent. It's a get it done or else attitude not a if you get it done think of how cool that would be or how much money we all make.


I think RJ was great to have in the early stages, but a more industry experienced CEO would be nice to have. Also Rivian needs to stop hiring Tesla rejects!!

 

[Dark-Fx]

Forcing unemployment in a labor constrained market is going to force some companies out of business.

My overly simplistic view of it is if the workforce is labor constrained, maybe there are just too many businesses?

 

[Zoidz]

My overly simplistic view of it is if the workforce is labor constrained, maybe there are just too many businesses?

I might agree except for one key thing - during/post COVID, the available work force was reduce 2 to 4 million people - normal retirement, early retirement, 2 earner families deciding to go to 1 earner, people having a change of lifestyle values, and deaths. The workforce has had a major reduction in the past two years.

 

[DuoRivians]

The pricing on the convertible debt was announced. I think it's favorable and reasonable for Rivian, i.e. not sure why the stock sold off so disproportionally.

- $1.3B note with $200M option to extend by buyer
- 4.625% interest rate
- Conversion strike at approximately $20.13.
- If entire principal was converted, it represents an approximate 5% dilution.

This money will be used to build the R2 factory in Georgia.

 

[NineElectrics]

This money will be used to build the R2 factory in Georgia.

Call me pessimistic, but I’m not so sure it will be used for expansion. Even if Rivian meets its goal and sells 50K vehicles at 90K a pop this year, that’s not enough revenue to cover its current rate of losses—and that rate of losses ($1.7B last quarter) already includes existing revenue from selling at a 40K annualized run rate! They’re in a “the more they make, the more they lose” situation and they need to be the opposite. So I expect this money is going to eventually be used to cover losses. Tesla did turn it around eventually, but it’s took a long time, a lot of mistreatment of workers, a lot of pressure on suppliers, lots of selling of pollution indulgences to other automakers, and quality is still bad. Really, only the China factory is solidly profitable (or was before the recent round of price cuts).

 

[Trandall]

"green bonds".. what a joke!

You are building vehicles that literally waste 2kWh per day doing absolutely nothing. multiply that across a fleet of 20,000 vehicles and you'll realize just how un-green Rivian really is.

My R1T is green... Launch green to be specific.
The net result of most "Green Initiatives" have negligible effect on the environment and waste a bunch of money. If this is what we are all referring to as "green" then I would say Rivian is right up there with the "greenest" companies.

 

[clcbjc123]

If Rivian needs money. They can just pay me to cancel my order. At $5,000, they will probably lose less money than building it for me.

 

[zipzag]

Call me pessimistic, but I’m not so sure it will be used for expansion. Even if Rivian meets its goal and sells 50K vehicles at 90K a pop this year, that’s not enough revenue to cover its current rate of losses—and that rate of losses ($1.7B last quarter) already includes existing revenue from selling at a 40K annualized run rate! They’re in a “the more they make, the more they lose” situation and they need to be the opposite. So I expect this money is going to eventually be used to cover losses. Tesla did turn it around eventually, but it’s took a long time, a lot of mistreatment of workers, a lot of pressure on suppliers, lots of selling of pollution indulgences to other automakers, and quality is still bad. Really, only the China factory is solidly profitable (or was before the recent round of price cuts).

I've been wondering about Georgia too. Georgia is a big factory as announced..

They need to pay for the factory, and then pay to ramp the R2 to a couple hundred thousand rate. They will need to do that ramp in an environment where every manufacturer is launching a Model Y "SUV" competitor. All those manufacturers are competing for critical supplies, especially batteries.

That's a really steep hill for Rivian that hasn't been able to ramp the R1.

The R2 is Rivian's "bet the farm" moments as the Model 3 was for Tesla. Tesla bet was that car buyers would buy a mid priced EV in the hundreds of thousands. Rivian's bet is that buyers will chose the R2 over competitors and do so at an annual rate of hundreds of thousands. They are also betting that they can acquire parts at a far higher rate than today. And also that they can do all that at a positive margin per vehicle once volume is reached.

Many of the clever design choice, including accessories, that Rivian has with the R1 are not available with the R2.

So if you are a big money investor in Rivian what is the thesis for moving forward profitably in Georgia? Or you consolidate a win with the R1 and find a buyer who wants Rivian and another factory site in Georgia?

 

[kurtlikevonnegut]

I might agree except for one key thing - during/post COVID, the available work force was reduce 2 to 4 million people - normal retirement, early retirement, 2 earner families deciding to go to 1 earner, people having a change of lifestyle values, and deaths. The workforce has had a major reduction in the past two years.

Labor participation rates, especially in the sweet spot demographic for manufacturing, dropped like a rock in early 2020 and never recovered to precovid levels.

 

[clcbjc123]

My overly simplistic view of it is if the workforce is labor constrained, maybe there are just too many businesses?

My simplistic view is we printed too much cash.

 

[jjswan33]

The simple answer is there is not simple reason for the inflationary environment we are in. Also keep in mind this is a global problem not isolated to just the US. Multiple factors contribute:

- Labor shortages leading to higher wages
- Supply chain issues causing prices to go up when demand outstripped supply
- People saving money during the pandemic when there wasn't anything to do and a lot of uncertainty about the future
- Years of ultra low interest rates, Which contributed a great deal to higher real estate prices and business investment
- etc
- etc

Some people want to make this political, it's much more nuanced. Frankly government has much less influence on these things than they like to think or than we tend to blame them.

 

[Riv_Ian]

Globalization has been the biggest disinflationary driver over the last 2-3 decades IMO. Retrenchment away from globalization for multiple causes (COVID illustrated supply chain fragility, IP theft, comparative domestic fuel cost advantage, automation,…) will be inflationary, at least in the near term but is also strategically necessary IMO.

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