Rivian’s stock bounces back into the green in wake of convertible debt pricing

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Shares of Rivian Automotive Inc. have roller-coastered back into the green Friday’s, a day after suffering a record selloff, in the wake of the pricing of the electric vehicle maker’s $1.5 billion convertible debt offering.

The stock
RIVN,
-0.78%
had plummeted 22.9% on Thursday, the biggest one-day decline since it went public in November 2021, in reaction to the EV maker’s convertible capital raise and third-quarter sales outlook.

But after the pricing was announced late Thursday, Rivian’s stock rose as much as 2% soon after the start of the premarket session at 4 a.m. Eastern, before reversing to a loss of as much as 4.8% about 30-minutes before the opening bell.

The stock has battled back into the green since the open, and was last up 0.1% in morning trading.

The company said late Thursday that the $1.5 billion “green” convertible senior notes due 2030 will accrue interest at a rate of 3.625%.

The rate is a whole percentage point lower than the company’s last offering, as the $1.3 billion “green” convertible debt offering in March priced at a rate of 4.625%.

Over the same time, the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
increased by about 0.74 percentage points through Thursday.

Meanwhile, the initial conversion rate for the latest offering represented an initial conversion price of $23.29, a 27.5% premium over Thursday’s closing price of $18.27. For the March offering, the initial conversion price of $20.13 represented a 37.5% premium.

The stock had rallied 24.8% since the last offering.

The latest offering can be converted at any time, from and after July 15, 2030, to common stock, cash or a combination of stock and cash, while the March offering could be converted at any time after Dec. 15, 2028. Basically, the initial conversion rate of the latest offering implies a 15.7% gain in the stock in the 19 months between the offerings’ conversion periods.

Truist analyst Jordan Levy reiterated his buy rating in a note published before the latest offering priced. His $30 stock price target implies a 64% upside to Thursday’s closing price.

Levy said the latest offering “largely falls in line with expectations,” and represents Rivian’s strategy of continued “opportunistic” capital raises, as the announced after Wednesday’s close came after the stock ran up 9.2% on the day.

Although a selloff in the stock post-offering was expected, Levy believes that with “most of the unknowns out of the way,” he sees an “increasingly positive setup” into Rivian’s third-quarter results, which are expected in early November.

The stock has lost 15.4% over the past three months, while EV giant Tesla Inc.’s stock
TSLA,
-2.88%
has lost 8.3% and the S&P 500 index
SPX
has slipped 3.4%.

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