Rivian Automotive, Inc. RIVN shares were seen moderately higher in premarket trading on Wednesday.
What Happened: Rivian shares fell 14.54% on Tuesday. The company made an announcement concerning the proposed issue of $1.3 billion worth of green convertible, senior notes.
The notes will accrue interest at a rate of 4.625% per annum, payable semi-annually on March 15 and Sept. 15 each year.
See Also: Is Rivian (RIVN) Stock A Good Buy Right Now
The notes, issued through a private offering to qualified institutional investors, are due to mature on March 10, unless earlier repurchased, redeemed or converted. Noteholders can exercise their right to convert the notes before Dec. 15, 2028, only upon the occurrence of certain events. Between this date and the maturity, they can opt to convert their notes at any time at their election.
Rivian also said it will settle conversions by paying cash or delivering its Class A common stock or a combination of both, depending on its choice. The initial conversion rate is 49.6771 shares of its common stock per $1,000 principal amount of notes, working out to a conversion price of $20.13 per share.
This represented a premium of 37.5% over Rivian’s closing price of $14.64 per share on Tuesday.
Rivian expects to raise net proceeds of $1.29 billion from the offering, with the amount increasing to $1.48 billion if initial purchasers exercise the option to purchase additional notes.
Why It’s Important: Rivian is facing supply chain issues, which have served to push out the lead times of its electric vehicles. The company’s 2023 production guidance of 50,000 units issued in late February trailed the Street estimate for 60,000 units.
The company is tapping debt financing at times credit conditions are tight. The premium conversion price it is offering for converting the notes to equity could act as a pulling point.
The incremental capital will likely help plug in any potential hole left in its funding needs due to the slow production ramp.
In premarket trading on Wednesday, Rivian shares were edging up 0.20% to $14.64, according to Benzinga Pro data.
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