the plot thickens for RIVN

Rivian (NASDAQ: RIVN) stock price plunged hard in extended hours after the company announced a $1.7 billion cash offering. The RIVN stock cratered to a low of $16.14, which was about 6% below its closing price of ~$17.13. It has plunged by more than 90% from its highest point on record, dragging the market cap to about $15.8 billion.

Rivian is at a major risk

Rivian, a major electric vehicle company, that was once valued more than Ford, has been under pressure. In 2022, the company burned through billions of dollars as it ramped up production. The firm’s revenue of $663 million came in at lower than expected. It lost $1.73 per share as it produced 10,020 vehicles in the fourth quarter, as we wrote here.

Rivian saw its cash burn increase at a worrying rate. It ended 2021 with more than $18 billion in cash on hand. By the end of 2022, this cash hoard had plummeted to about $11.56 billion. If the cash burn increases, analysts believe that Rivian’s current cash will run out by 2025. 

Rivian stock price plunged after the company announced that it will seek to raise $1.3 billion in cash in a private offering. The new fundraising is structured as a green convertible senior note offering. This note will accrue interest payable every six months with the maturity date being March 2029.

Investors are concerned about the situation considering that the company is sitting at over $11 billion in cash. And with interest rates rising, the company is seeing a significant return on its cash on hand. In 2022, Rivian’s interest and investment income jumped to over $103 million, higher than the previous $11 million.

Rivian and other EVs are facing significant challenges ahead. Competition is soaring as companies like Ford and Tesla ramp up their production. At the same time, while supply chain issues have been solved, there are challenges about demand. On Monday, Tesla said that it was cutting prices for some of its top products. This is a sign that there is a demand problem.

The only hope for Rivian is if the company is able to boost production in a profitable way. The company has guided to produce 50k cars this week. Internally, the firm has told its employees that it aims to manufacture over 62k cars this year.

Rivian stock price forecast

Rivian stock

RIVN chart by TradingView

The daily chart shows that the RIVN stock price has been in a strong bearish trend in the past few months. This decline saw the stock plunge below the key support level at $19.14, the lowest level on May 11. It has also declined below all moving averages. Most importantly, the stock formed an inverted cup and handle pattern. 

Therefore, the outlook for the shares is still bearish, with the next viable level to watch being $10, which is about 40% below the current level.