Why is Rivian Stock Dropping

In the first hour of trading , shares of Rivian Automotive (RIVN 2.28%) fell more than 12%, reaching a record low. But why is Rivian stock dropping

The decrease followed the company’s announcement that it was soliciting more money in a Securities and Exchange Commission filing. As of 10:40 a.m. ET, the stock had decreased by 11.5%.

What’s the problem with Rivian?

Owners of Rivian EVs and Lucid Motors have complained to NHTSA about issues with their cars as well as online in forums for owners. From seats that move on their own to full bricking, the issues range. Despite the issues, the majority of owners report having pleasant experiences with their cars—when they function properly.

So what

Following the release of the company’s fourth-quarter and full-year 2022 profits, Rivian shares have partially rebounded from a decline last week. However, the news of today has investors pulling their money out of the electric vehicle (EV) startup yet again. Because if the $1.3 billion convertible bond issuance is ultimately converted to common stock, it will diminish current stockholders.

Now what

Rivian revealed last week that it had lost $6.8 billion overall and $1.7 billion in the fourth quarter alone. As of December 31, 2022, it still had $12.1 billion in cash and equivalents, a decrease from $17 billion on March 31.

The business had stated that it only has the funds necessary to fund operations through 2025.

The fact that Rivian intends to raise more money as its capital-intensive business expands its production capacity shouldn’t therefore come as much of a surprise.

When the bonds are converted to stock, existing shareholders will likely experience dilution, according to the terms of the bond issuance, which have not yet been revealed.

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The company plans to put the fresh capital toward the development of its future R2 vehicle platform, according to a Reuters report.

A company spokesperson also said the move offered “optimal cost of capital versus selling equity at today’s levels.”

Rivian still has the long-term potential to be very successful as the EV market grows. While it remains a highly risky stock even at its lows, today’s drop could offer some investors a good opportunity to add shares while the company shores up its capital position.

Should you invest $1,000 in Rivian Automotive right now?

Before you consider Rivian Automotive, you’ll want to hear this.

The Motley Fool Stock Advisor analyst team just revealed what they believe are the 10 best stocks for investors to buy right now… and Rivian Automotive wasn’t one of them.

Stock Advisor is the online investing service that has beaten the stock market by 3x since 2002*. And right now, they think there are 10 stocks that are better buys.

Will Rivian stock go back up?

The median price objective among the 21 analysts that are providing 12-month price projections for Rivian Automotive Inc. is $25,000, with high and low estimates of $40.00 and 11,000, respectively. From the most recent price of 14.48, the median projection reflects an increase of +72.65%.

Is Rivian going to fail?

Additionally, Rivian is spending money at an unsustainable rate. The corporation lost $1.2 billion in the most recent quarter it had before the 2021 statement; it would lose a total of $4.7 billion in 2021; and another $6.8 billion in 2022.

Can Rivian survive?

The success of Rivian’s second platform, the R2, which is anticipated to be produced in the new Georgia plant starting in 2026, will be crucial to the company’s capacity to survive.

Why is Rivian not making money?

Rivian, a maker of electric trucks, said on Tuesday that it lost $1.7 billion in the final three months of last year as it struggled with production difficulties.

Can Rivian surpass tesla?

If all goes according to plan, Rivian could surpass Tesla in size by the end of 2030, but the stock is still quite speculative. The Motley Fool’s board of directors is made up of John Mackey, CEO of Whole Foods Market, an Amazon subsidiary.

Who is Rivian’s biggest competitor?

NIO (NIO), Lucid Group (LCID), XPeng (XPEV), Polestar Automotive Holding UK (PSNY), Oshkosh (OSK), Li Auto (LI), PACCAR (PCAR), General Motors (GM), Ford Motor (F), and Stellantis (STLA) are some of Rivian Automotive’s primary rivals. Each of these businesses belongs to the “motor vehicles & car bodies” sector.