- Rivian announced that it will raise $1.3 billion in new debt obligations.
- Rivian already had about $13 billion in cash on its balance sheet.
- Fed Chair Powell says central bank may require higher rates.
- RIVN stock reaches $15, an all-time low.
Rivian (RIVN) is ruffling some feathers on Tuesday following the announcement that it is seeking to raise $1.3 billion from the debt markets. Additionally, RIVN stock is down 12.1% at lunchtime due to some hawkish statements from Federal Reserve Chair Jerome Powell. Answering questions before the Senate Banking Committee on Tuesday morning, Powell said the central bank would need to raise interest rates higher than prior expectations. RIVN is trading at an all-time low of $15.
Federal Reserve testimony: Powell scares the market
Referring to the most recent Personal Consumption Expenditures (PCE) data that demonstrated higher than expected inflation in the services sector, Powell surprised the market by saying he was worried about sticky prices. This was not his like his recent statement from the last FOMC meeting where he talked of the current “disinflationary” path the economy was on.
“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
As recently as December, the Fed Chair was signaling that 5.1% was the terminal rate for the fed funds rate. Now the central bank has pushed that up to a range between 5.25% and 5.5%.
Rivian stock news: $1.3 billion in brand new debt
In other news, Rivian Automotive, led by CEO RJ Scaringe, is set to raise $1.3 billion in green senior notes. RIVN stock sold off immediately on the news, because the bonds are convertible into equity. This means that existing shareholders could get diluted in a major fashion. Management said it was better to offer convertible bonds rather than pure equity due to the current low share price of RIVN.
The convertible bonds mature in 2029, but investors who purchase the initial allotment will be given the chance to buy another $200 million in bonds about two weeks after the first tranche is fully sold. The debt will be used for production of Rivian’s R2 vehicle platform. The announcement surprised many investors, because Rivian had approximately $13 billion in cash on its balance sheet at last check.
The announcement states: “The interest rate, initial conversion rate and other terms of the notes will be determined at the pricing of the offering.”
Rivian stock forecast
Rivian stock has broken below the $15.28 to $15.85 demand zone that mostly held up this year until now. From here it is anyone’s guess how much further RIVN stock could drop. Rivian will not be viewed in a bullish light until it breaks above the $22 topline of the resistance zone from January and February. For now Rivian stock is holding above $15.
RIVN 1-day chart
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