What happened
Rivian Automotive (RIVN 3.48%) has been a Wall Street darling among stocks in the electric vehicle (EV) sector recently. Going into today's trading session, Rivian shares were up an astounding 54% over the last six months.
But the stock is getting slammed today. As of 10:25 a.m. ET, Rivian shares had tumbled by 17.2%.
So what
The crash came after the company provided preliminary financial results for the third quarter. Investors reading between the lines were disappointed, and that disappointment was reinforced by another announcement that Rivian was planning to sell $1.5 billion in convertible debt.
It's not uncommon for stocks to drop after convertible bond sales are announced. After all, it potentially adds common shares that would dilute existing shareholders. In this case investors are likely more worried about how it relates to what's going on in the business. Rivian reported $10.2 billion in cash and equivalents on its balance sheet as of June 30. But in the new filing, the company showed that it burned through more than $1 billion in cash in the third quarter, which ended with $9.1 billion on the balance sheet.
Now what
Rivian had previously announced its vehicle production and delivery data for the third quarter. So investors already had a pretty good idea of how much revenue was generated in the quarterly period. The range it provided in the filing did indeed fall in line with analyst expectations.
But the cash burn and subsequent bond sale has certainly increased investor anxiety today. Many had likely believed that Rivian had a sufficient cash pile to reach positive cash flow from its operations. That seems in doubt now, and the rate of cash burn surprised investors. Look for more details when the company reports its full third-quarter results and answers analyst questions on Nov. 7.
