Rivian Automotive’s ($RIVN) Busted Convertible Bonds: High-Stakes Opportunity in a Crowded EV Market
A Deep Dive into Rivian’s Financial Health, Partnerships, and Convertible Debt
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This week, I’ll be looking into Rivian, an EV manufacturer known for its premium adventure/lifestyle vehicles and commercial delivery vans. The company currently has ~$5.5bn of debt outstanding, split between $1.3bn senior secured FRNs due 2026, $3.2bn of convertible notes due 2029/2030, and a new $1.0bn Volkswagen convertible note. As a point of reference, the 2030 converts currently trade at ~77 offering ~8.6% YTM up 76%.
While Rivian has demonstrated strong product-market fit with 86% customer repurchase rates and key strategic partnerships including Amazon’s 100k vehicle commitment, it faces substantial challenges including negative gross margins, high FCF burn, and increasing EV market competition. In this post, I’ll examine whether the convertible bonds, supported by $9.2bn of liquidity and strategic/asset value, offer compelling risk-reward at current levels. Separately, as a house keeping matter, I will be raising prices ahead of year end. Anyone subscribing before then will be grandfathered into this year’s prices.
Let’s dive in.
Situation Overview:
Headquartered in Irvine, California, Rivian Automotive, Inc. (“RIVN”) is a vertically integrated Electric Vehicle (EV) manufacturer focused on the premium adventure/lifestyle segment and commercial delivery vehicles. The company designs, develops, manufactures, and sells its vehicles through a direct-to-consumer model, operating a 3.3 million sq. ft. manufacturing facility in Normal, Illinois.
RIVN’s consumer portfolio consists of the R1S seven-passenger SUV and the R1T pickup truck, which retail between $73,000-95,000. On the commercial side, the company produces Electric Delivery Vans (EDV) based on its Rivian Commercial Vehicle (RCV) platform, with Amazon as its primary customer under a 100,000-unit purchase commitment. As of LTM June 2024, RIVN has delivered ~57k vehicles across its consumer and commercial platforms, generating $5.0bn in revenue and -$3.7bn in Adj. EBITDA.
Early Years and Product Development
Unlike many EV startups that rushed to market, RIVN spent nearly a decade developing its tech stack and vehicle platforms. Founded in 2009, the company initially focused on developing an electric sports car before pivoting to the more lucrative truck and SUV segments in 2018. The lengthy development period allowed RIVN to create a vertically integrated ecosystem including its proprietary vehicle tech platform, cloud architecture, and software stack.